Opinion

WUNDERLICH, J.

I. INTRODUCTION

In this original proceeding, we consider a writ petition filed by a law firm and a former firm attorney for extraordinary relief from the trial court’s discovery order compelling the attorney to answer deposition questions asked by real parties in interest about the legal advice given to the law firm’s corporate client regarding a merger. Petitioners contend that the successor corporation is now the holder of the attorney-client privilege of the merged client corporation, and because the successor corporation has not waived the privilege, the attorney cannot answer the deposition questions without violating the attorney-client privilege. We agree, and for that reason we will issue a peremptory writ of mandate to vacate the discovery order.

II. FACTUAL AND PROCEDURAL BACKGROUND

A. Background

According to the second amended complaint, the plaintiffs are Alok Singhania, Rajesh Swamy, Robert Adams, Amitabh Shah, and Vidya Damle (hereafter plaintiffs or real parties in interest). The defendants include Soft Plus, Inc., a California corporation (hereafter Soft Plus), Soft Plus, Inc., a Delaware corporation (hereafter SPDel), and U.S. Interactive, Inc. (hereafter USI), and individual defendants Mohan Uttarwar, Vijay Uttarwar, and Vinay Deshpande. Plaintiffs were all employees and shareholders of Soft Plus who left their employment before Soft Plus merged with SPDel, a wholly owned *100subsidiary of USI, in 2000. Plaintiffs generally allege they were deprived of their statutory rights as minority shareholders to inspect Soft Plus’s corporate records and to be given their dissenters’ rights with respect to the merger with USI.

The three individual defendants are former officers and directors of Soft Plus who collectively were the company’s majority shareholders. Plaintiffs assert causes of action against the former officers and directors, who are the only remaining defendants, for breach of fiduciary duty to minority shareholders, declaratory relief (consisting of a judicial determination of plaintiffs’ appraisal rights under Corp. Code, § 1300 et seq.), and violation of California securities laws.

B. The Discovery Motion

During the course of discovery, a dispute arose concerning the deposition of petitioner Ashley Giesler, a former attorney with petitioner Venture Law Group (hereafter VLG). VLG had provided legal advice to Soft Plus in connection with its merger with USI. Plaintiffs took Giesler’s deposition, but she asserted the attorney-client privilege and refused to answer questions about the legal advice that VLG gave to Soft Plus regarding Soft Plus’s alleged denial of plaintiffs’ inspection rights and dissenter’s rights. Plaintiffs then brought a motion before the discovery referee to compel Giesler to answer the deposition questions.

Plaintiffs argued that these questions were not barred by the attorney-client privilege because the individual defendants had raised advice of counsel as a defense, thereby waiving the privilege by implication. Plaintiffs further argued that they would be unable to evaluate or counter the advice of counsel defense absent discovery of the advice in question. In so arguing, they relied on Wellpoint Health Networks, Inc. v. Superior Court (1997) 59 Cal.App.4th 110 [68 Cal.Rptr.2d 844], for the proposition that interjecting the substance of communications with counsel into the litigation constitutes a waiver of the attorney-client privilege.

VLG and Giesler argued in opposition to the motion to compel that Giesler was duty bound to assert the attorney-client privilege, because an attorney must assert the privilege at a deposition unless the holder of the privilege instructs otherwise. Because USI was now the holder of Soft Plus’s attorney-client privilege as a result of the merger and USI had instructed VLG to maintain the privilege, Giesler insisted she could not answer the deposition questions about her legal advice to Soft Plus. VLG and Giesler also argued that plaintiffs had failed to show an express or implied waiver of the attorney-client privilege by a holder of the privilege. According to VLG, the *101individual defendants were not holders of Soft Plus’s attorney-client privilege because they were never clients of VLG. Instead, VLG argued, only the current management of the successor corporation, USI, had authority to waive the privilege, and current management had not done so.

The discovery referee granted plaintiffs’ motion and ordered Giesler to provide answers to the following questions: “(1) what advice was sought and given regarding dissenter’s rights; and, (2) what advice was sought and given regarding plaintiffs’ requests to obtain documents or information about Soft Plus, Inc.” In proceedings before the trial court, VLG and Giesler filed objections to the discovery referee’s recommendation, again asserting that Giesler had properly asserted the attorney-client privilege. Plaintiffs filed opposition to the objections, elaborating on their position that the attorney-client privilege did not apply. In particular, plaintiffs denied that USI was now the holder of the privilege on the ground that USI had no legitimate interest in suppressing Giesler’s testimony because USI had been absolved of liability through bankruptcy. Alternatively, plaintiffs argued that the current holder of the privilege was Soft Plus’s insurer, National Union Insurance Company, which was defending the litigation and, according to plaintiffs, had chosen to waive the privilege by pursuing an advice of counsel defense.

The trial court apparently agreed with plaintiffs, adopted the discovery referee’s report, and made the referee’s recommendation to grant the motion to compel Giesler to answer certain deposition questions an order of the court. VLG and Giesler sought extraordinary relief from the discovery order by filing a petition for writ of mandate in this court, and we issued an order to show cause why the relief sought should not be granted. We also issued a temporary stay to protect the attorney-client privilege while our writ review was pending.

III. DISCUSSION

A. Availability of Writ Relief and the Standard of Review

Although writ review of discovery orders is disfavored, such review is appropriate when petitioner seeks extraordinary relief from a discovery order that may undermine a privilege. (Raytheon Co. v. Superior Court (1989) 208 Cal.App.3d 683, 686 [256 Cal.Rptr. 425].) Thus, writ review has been granted where the trial court’s discovery order compelling an attorney to answer deposition questions would cause the attorney to violate the attorney-client privilege. (Dickerson v. Superior Court (1982) 135 Cal.App.3d 93, 97 [185 Cal.Rptr. 97].)

The standard of review for discovery orders is abuse of discretion. (National Football League Properties, Inc. v. Superior Court (1998) 65 *102Cal.App.4th 100, 107 [75 Cal.Rptr.2d 893].) A discovery order compelling answers that violate the attorney-client privilege constitutes an abuse of discretion. (See Dickerson v. Superior Court, supra, 135 Cal.App.3d at p. 100.) In the present case, we find for the reasons discussed below that the trial court abused its discretion when it ordered Attorney Giesler to answer deposition questions, in violation of the corporate attorney-client privilege.

B. Application of the Corporate Attorney-client Privilege

In general, when a party asserts the attorney-client privilege, that party has the burden of showing the preliminary facts necessary to support the privilege. (State Farm Fire & Casualty Co. v. Superior Court (1997) 54 Cal.App.4th 625, 638-639 [62 Cal.Rptr.2d 834].) The necessary preliminary facts include the existence of the attorney-client relationship at the time the confidential communication was made. (Alpha Beta Co. v. Superior Court (1984) 157 Cal.App.3d 818, 824-825 [203 Cal.Rptr. 752].) After this burden is met, or where there is no dispute concerning the preliminary facts, the burden shifts to the party opposing the privilege to show either the claimed privilege does not apply, an exception exists, or there has been an express or implied waiver. (Evid. Code, § 917;1 Wellpoint Health Networks, Inc. v. Superior Court, supra, 59 Cal.App.4th at pp. 123-124.)

We discern no real dispute in the present case regarding the preliminary facts necessary to support the attorney-client privilege claim asserted by petitioners VLG and Giesler. The evidence showed the existence of an attorney-client relationship between Soft Plus and petitioners at the time Giesler provided confidential legal advice to Soft Plus regarding the USI merger. Accordingly, the burden shifted to real parties in interest, plaintiffs below, as the parties opposing the privilege. Real parties have attempted to meet their burden by arguing the attorney-client privilege does not apply to Giesler’s legal advice to Soft Plus, or, alternatively, the privilege has been waived by the individual defendants’ assertion of the advice of counsel defense. To determine whether real parties met their burden in opposing the privilege, we first look to the rules for the application of the attorney-client privilege to corporate clients.

Those rules are well established in California. A corporation is a person whose confidential communications with its attorney are protected by the attorney-client privilege. (§ 175; D.I. Chadbourne, Inc. v. Superior Court (1964) 60 Cal.2d 723, 732 [36 Cal.Rptr. 468, 388 P.2d 700]; National Football League Properties, Inc. v. Superior Court, supra, 65 Cal.App.4th at p. 107.) The attorney’s duty of loyalty is to the corporate entity. “In *103representing an organization, a member shall conform his or her representation to the concept that the client is the organization itself, acting through its highest authorized officer, employee, body, or constituent overseeing the particular engagement.” (Rules Prof. Conduct, rule 3-600(A).) However, as one commentator has noted, “When control of a corporation changes, and particularly when control of the corporation is challenged, attorneys will often confront complicated decisions involving personal and institutional relationships and loyalties. It is almost impossible to advise the corporation’s officers or its board on a course of action that does not benefit some constituent interest (i.e., majority or minority shareholders), the existing management, or a creditor. The attorney must insure that his or her recommendations for action are clearly based on the best interests of the corporation.” (Counseling Cal. Corporations (Cont.Ed.Bar 2003) § 2.6, p. 137.)

After a merger, the attorney-client privilege of the corporation no longer in existence belongs to the successor corporation. (Dickerson v. Superior Court, supra, 135 Cal.App.3d at p. 98.) This is because section 953, subdivision (d), provides that the successor of a disappeared corporation becomes the holder of the attorney-client privilege. (Dickerson v. Superior Court, supra, 135 Cal.App.3d at p. 98.) The privilege may be claimed by “[t]he person who was the lawyer at the time of the confidential communication, but such person may not claim the privilege if there is no holder of the privilege in existence or if [s]he is otherwise instructed by a person authorized to permit disclosure.” (§ 954, subd. (c).)2 Thus, “[a]s long as there is a holder of the privilege in existence at the time disclosure is sought, the attorney has the duty to exercise the privilege unless the holder of the privilege instmcts [her] not to do so.” (Dickerson v. Superior Court, supra, 135 Cal.App.3d at p. 98.)

Applying these rules, we next consider whether Giesler properly asserted the attorney-client privilege at her deposition on the ground that USI is now the holder of Soft Plus’s attorney-client privilege and USI had instructed her to maintain the privilege.

C. USI Holds Soft Plus’s Attorney-client Privilege

We agree with petitioners that USI is now the holder of Soft Plus’s attorney-client privilege with respect to Giesler’s premerger advice to Soft Plus. There is no dispute that as a result of the merger Soft Plus disappeared and USI became its successor. Therefore, USI is now the holder of *104Soft Plus’s attorney-client privilege and Giesler had a duty to assert the privilege in the absence of any contrary instruction from USI. (§ 953, subd. (d); see also Dickerson v. Superior Court, supra, 135 Cal.App.3d at p. 98.)

Real parties nevertheless contend that USI is not the holder of Soft Plus’s attorney-client privilege, for several reasons. First, they argue that USI should have no interest in suppressing Giesler’s testimony because USI has no potential liability due to the discharge of claims in bankruptcy. We reject this novel contention because it is unsupported by any legal authorities and is contrary to the mandate of section 953, subdivision (d), that a successor corporation is the holder of the disappeared corporation’s privilege.

Real parties also offer a second novel contention, that Soft Plus’s officers and directors liability insurance carrier, National Union Insurance Company, is the holder of the privilege because it is directing the defense for defendants and has chosen to pursue a defense based upon advice of counsel, and because it is “analogous to new management.” We reject this contention because it is unsupported by any legal authorities. As petitioners point out, an insurance company that contracted to provide officers and directors coverage cannot constitute a merged corporation’s successor within the meaning of section 953, subdivision (d). Moreover, while the general rule is that “the deliberate injection of the advice of counsel into a case waives the attorney-client privilege as to communications and documents relating to the advice. [Citation.] . . . [A]n insurer does not waive the attorney-client privilege where it is not defending itself on the basis of the advice it received.” (Transamerica Title Ins. Co. v. Superior Court (1987) 188 Cal.App.3d 1047, 1053 [233 Cal.Rptr. 825].) Here, National Union Insurance Company is not defending itself and has no standing to waive Soft Plus’s attorney-client privilege.

Third, real parties argue that the individual defendants waived Soft Plus’s attorney-client privilege as holders of the privilege who have asserted the advice of counsel defense. We disagree. Former management of a merged company does not hold the merged company’s attorney-client privilege and may not waive the attorney-client privilege post-merger. The California Supreme Court observed, in a case involving the transfer of the attorney-client privilege to a successor trustee, that other courts have concluded “the power to assert the attorney-client privilege passes from a predecessor officer to a successor in the analogous context of corporate affairs.” (Moeller v. Superior Court (1997) 16 Cal.4th 1124, 1136-1137 [69 Cal.Rptr.2d 317, 947 P.2d 279].)

One of the other courts is the United States Supreme Court, which in Commodity Futures Trading Comm’n v. Weintraub (1985) 471 U.S. 343, *105348-349 [85 L.Ed.2d 372, 105 S.Ct. 1986], stated, “[T]he power to waive the corporate attorney-client privilege rests with the corporation’s management and is normally exercised by its officers and directors. The managers, of course, must exercise the privilege in a manner consistent with their fiduciary duty to act in the best interests of the corporation and not of themselves as individuals.” The Supreme Court further declared, “when control of a corporation passes to new management, the authority to assert and waive the corporation’s attorney-client privilege passes as well. New managers installed as a result of a takeover, merger, loss of confidence by shareholders, or simply normal succession, may waive the attorney-client privilege with respect to communications made by former officers and directors. Displaced managers may not assert the privilege over the wishes of current managers, even as to statements that the former might have made to counsel concerning matters within the scope of their corporate duties.” (Id. at p. 349, fn. omitted.)

It therefore follows that the individual defendants, as displaced managers, have no authority to waive Soft Plus’s attorney-client privilege over the wishes of the current managers of USI. Moreover, the implied waiver caused by asserting the advice of counsel defense is “limited to situations where the client has placed into issue the decisions, conclusions, and mental state of the attorney who will be called as a witness to prove such matters.” (Transamerica Title Ins. Co. v. Superior Court, supra, 188 Cal.App.3d at p. 1053, italics added.) Thus, waiver is established by showing that the client “ ‘put the otherwise privileged communication directly at issue and that disclosure is essential for a fair adjudication of the action.’ ” (Wellpoint Health Networks, Inc. v. Superior Court, supra, 59 Cal.App.4th at p. 128.)

Here, there is no dispute that the defendants in their individual capacities as directors, officers, and majority shareholders were not the clients of VLG and Giesler. Since they were not clients, the individual defendants cannot impliedly waive the attorney-client privilege that attached to their confidential communications with VLG and Giesler on behalf of Soft Plus by asserting the advice of counsel defense. We understand real parties’ argument that they must be allowed to depose Giesler in order to test the validity of the advice of counsel defense and the individual defendants’ credibility. However, as this court has explained, “the privilege is not vitiated by the fact that its exercise may occasionally suppress relevant evidence. It has been recognized that the search of truth must sometimes give way to the purposes of the privilege.” (Transamerica Title Ins. Co. v. Superior Court, supra, 188 Cal.App.3d at p. 1052.) Thus, “the privilege is not to be set aside when one party seeks verification of the authenticity of its adversary’s position.” (Id. at p. 1053.)

For these reasons, we find that real parties failed to meet their burden to show either that the claimed attorney-client privilege did not apply to *106petitioners’ confidential communications with Soft Plus or that there was an implied waiver of Soft Plus’s privilege. Accordingly, we conclude that the trial court erred in granting real parties’ motion to compel Giesler to answer deposition questions that would violate the attorney-client privilege and extraordinary relief is necessary to correct the error.

IV. DISPOSITION

Let a peremptory writ of mandate issue directing respondent court to vacate its order of June 13, 2003, granting the motion of real parties in interest to compel deposition testimony from third party witness Ashley Giesler, and to enter a new and different order denying the motion. Upon finality of this opinion, the temporary stay order is vacated. Costs in this original proceeding are awarded to petitioners.

Bamattre-Manoukian, Acting P. J., Mihara, J., concurred.

*287Opinion

BOLAND, J.

SUMMARY

A shareholder in a company acquired in a merger transaction sued the law firm which represented the acquiring company for fraud. He alleged the law firm concealed the so-called toxic terms of a third party financing transaction, and thus defrauded him into exchanging his valuable stock in the acquired company for “toxic” stock in the acquiring company. The law firm demurred. It contended it made no affirmative misstatements and had no duty to disclose the terms of the third party investment to an adverse party in the merger transaction. We conclude the complaint stated a fraud claim based on nondisclosure. The complaint alleged the law firm, while expressly undertaking to disclose the financing transaction, provided disclosure schedules that did not include material terms of the transaction.

FACTUAL AND PROCEDURAL BACKGROUND

Frank T. Vega (Vega), a 23 percent shareholder in a company known as Monsterbook.com, sued Jones, Day, Reavis & Pogue (Jones Day), a law partnership, for fraud and negligent misrepresentation in connection with a merger transaction. In the merger transaction, Jones Day represented Transmedia Asia Pacific, Inc., which acquired Monsterbook. Monsterbook and Vega were represented by the law firm of Heller, Ehrman, White & McAuliffe (Heller Ehrman).

The terms of the acquisition included Vega’s receipt of restricted stock in Transmedia in exchange for his interest in Monsterbook. Monsterbook and Vega accepted the merger offer on March 8, 2000. Closing occurred on April 13, 2000, when the two companies exchanged stock based on a $15 million valuation of Monsterbook. Vega thus exchanged stock valued at $3.45 million for the restricted Transmedia stock.

During the weeks between Vega’s acceptance of the merger offer on March 8 and the closing on April 13, Transmedia, which “[everybody knew . . . was an iffy company,” sought and secured $10 million in investment financing from a third party.1 The terms of Transmedia’s $10 million third party *288financing transaction included so-called toxic stock provisions, under which the investors received convertible preferred stock that seriously diluted the shares of all other Transmedia stockholders. Both Transmedia and Jones Day knew that “toxic” stock financing is a “desperate and last resort of financing for a struggling company” and that 95 percent of companies who engage in such financing end up in bankruptcy.

Jones Day prepared a two-page disclosure schedule that clearly described and properly disclosed the “toxic” provisions of the $10 million investment, but did not send the disclosure to Vega, Monsterbook or Heller Ehrman. Jones Day knew that a full disclosure of the “toxic” terms of the financing would have “killed the acquisition,” without which Transmedia would not have obtained the financing and would have gone out of business. Instead, Vega, Monsterbook and Heller Ehrman were told, on about March 16, 2000, that the $10 million financing then being negotiated was “standard” and “nothing unusual” and that Jones Day and Transmedia would supply additional documents to support these characterizations of the financing.2 No documents showing the “toxic” nature of the investment were provided; instead, Jones Day supplied Heller Ehrman with “a different sanitized version” of the disclosure schedule which did not include the “toxic” stock provisions.

Jones Day also prepared, and Transmedia sent to Monsterbook and Vega, a consent form concerning the $10 million investment, which Vega signed. The consent form stated that the $10 million investment would be convertible into an aggregate maximum of 6,815,000 shares of common stock, “thus misrepresenting that it fell within the 20% dilution ‘toxic’ cap mandated by NASD Rule 4350(i)(l)(D).” On March 28, 2000, two weeks before the closing of Transmedia’s acquisition of Monsterbook, Jones Day filed a “Certificate of Designation” with the Delaware Secretary of State, certifying the creation of the convertible preferred stock. This document, available to the public, contained all the terms of the financing, including the “toxic” provisions.

The closing of the Monsterbook acquisition occurred on April 13, 2000. Eight months later, on December 14, 2000, Vega learned for the first time, *289through a press release issued by Transmedia, about the “toxic” stock provision of the $10 million financing. Several legal actions ensued.

First, on October 2, 2001, Monsterbook’s former majority shareholder, William H. McKee, who had owned 70.125 percent of Monsterbook’s stock, sued Heller Ehrman for legal malpractice. In a first amended complaint on November 21, 2001, McKee and a second shareholder, Paul R. Estrada, who had held a 1.486 percent interest in Monsterbook, also named Transmedia and Jones Day as defendants, alleging causes of action for fraud and negligent misrepresentation.

Second, on December 14, 2001, another shareholder, John Cuero, who had held a 2 percent interest in Monsterbook, sued Heller Ehrman, Jones Day, and Transmedia. This suit was consolidated with McKee’s lawsuit. In the consolidated actions, Jones Day sought and obtained summary judgment, and judgment was entered in its favor on August 23, 2002.3 Estrada waived his right to appeal; McKee abandoned his appeal; and Cuero’s appeal was dismissed at his request.

Third, on May 12, 2003, Vega filed this lawsuit against Jones Day and Transmedia, and Jones Day demurred.4 The demurrer to the fraud claim was sustained, without leave to amend, on multiple grounds, as follows:

— The claim did not allege an actionable, affirmative misstatement by Jones Day;

— Vega could not justifiably have relied on the statements allegedly made by Jones Day;

— Because Jones Day owed Vega no duty to disclose, Vega could not state a claim based on omission or nondisclosure;

*290— Vega did not allege damages proximately caused by Jones Day;

— Vega had no standing to bring the claim because it was derivative in nature;

— The claim was barred by the statute of limitations; and

— The claim was barred by res judicata.

Jones Day’s demurrer to the negligent misrepresentation claim was sustained on the same grounds and, in addition, because a negligent misrepresentation claim cannot be based on an omission or nondisclosure. The court also concluded Vega failed to plead both causes of action with the requisite specificity.

The trial court’s order sustaining the demurrers and dismissing Vega’s complaint with prejudice was filed August 5, 2003, and this appeal followed.5

DISCUSSION

Vega’s allegations may be summarized as follows. Jones Day hid the existence of the “toxic” stock provisions with the intent to induce Vega to give up his valuable stock in Monsterbook in exchange for Transmedia’s “toxic” and worthless stock. Jones Day knew about the “toxic” stock provisions, and knew the acquisition would not occur if Monsterbook, Vega and their lawyers discovered them. Jones Day deliberately concealed the “toxic” stock provisions by telling Heller Ehrman the transaction was “standard” and “nothing unusual,” by failing to provide the proper written disclosure it prepared, and by instead providing a different, sanitized version of the disclosure. Vega did not know, and had no reason to suspect, that the financing contained “toxic” provisions, and would not have given up his valuable stock in Monsterbook had he known. As a result of Jones Day’s concealment of the “toxic” terms of the financing, Vega lost his $3.45 million interest in Monsterbook.

*291We agree with Vega that the complaint properly states a fraud claim.

Before we analyze the elements of the claim, we note the governing legal principles.A fraud claim against a lawyer is no different from a fraud claim against anyone else. “ ‘If an attorney commits actual fraud in his dealings with a third party, the fact he did so in the capacity of attorney for a client does not relieve him of liability.’ ” (Shafer v. Berger, Kahn, Shafton, Moss, Figler, Simon & Gladstone (2003) 107 Cal.App.4th 54, 69 [131 Cal.Rptr.2d 777] (Shafer), quoting Jackson v. Rogers & Wells (1989) 210 Cal.App.3d 336, 345 [258 Cal.Rptr. 454].) While an attorney’s professional duty of care extends only to his own client and intended beneficiaries of his legal work, the limitations on liability for negligence do not apply to liability for fraud. (Ibid.) Accordingly, a lawyer communicating on behalf of a client with a nonclient may not knowingly make a false statement of material fact to the nonclient (Shafer, supra, 107 Cal.App.4th at p. 69), and may be liable to a nonclient for fraudulent statements made during business negotiations. (Cicone v. URS Corp. (1986) 183 Cal.App.3d 194, 202 [227 Cal.Rptr. 887] [“the case law is clear that a duty is owed by an attorney not to defraud another, even if that other is an attorney negotiating at arm’s length”].)

With these principles in mind, we turn to the elements of fraud, which are: “(1) representation; (2) falsity; (3) knowledge of falsity; (4) intent to deceive; and (5) reliance and resulting damage (causation).” (5 Witkin, Cal. Procedure (4th ed. 1997) Pleading, § 668, p. 123.) Active concealment or suppression of facts by a nonfiduciary “is the equivalent of a false representation, i.e., actual fraud.” (Id., § 678, p. 136, italics omitted.) We treat the various elements, and the bases for the trial court’s decision, in turn.

1. False representation.

We agree with Jones Day that a mere statement that the $10 million financing then being negotiated was “standard” and “nothing unusual” is not itself an actionable misrepresentation. While expressions of professional opinion are sometimes treated as representations of fact, a “casual expression of belief’ is not similarly treated. (Bily v. Arthur Young & Co. (1992) 3 Cal.4th 370, 408 [11 Cal.Rptr.2d 51, 834 P.2d 745], quoting Gagne v. Bertran (1954) 43 Cal.2d 481, 489 [275 P.2d 15].) Moreover, no party to a major transaction could reasonably rely on a casual statement by counsel for another party to the transaction.6

*292More problematic, however, is the question of active concealment or suppression of facts, which is the equivalent of a false representation. Vega alleges that Jones Day, after telling Heller Ehrman that Transmedia was about to close a $10 million private stock transaction which it wanted to include in its disclosure schedules, prepared a proper disclosure schedule containing the pertinent terms, but provided a “different sanitized version” of the schedule, without the “toxic” stock provisions. Thus, Vega alleges that Jones Day “deliberately or with a reckless disregard of the truth concealed the ‘toxic’ stock provisions” from Vega, Monsterbook and Heller Ehrman. These allegations state an “active concealment or suppression of facts.”7 (5 Witkin, Cal. Procedure, supra, § 678, p. 136, italics omitted.) So long as the remaining elements of a fraud claim are met (see discussion post), we are unable to conclude these allegations are deficient.

Jones Day contends that fraud based on concealment requires that the defendant have a duty to disclose the suppressed fact, and that as counsel for the adverse party in a merger, Jones Day owed no duty to disclose to Vega or Monsterbook the terms of the third party $10 million investment. Thus, the disclosure schedule, they contend, “is entirely irrelevant” because Jones Day had no duty to provide it to Monsterbook or Vega or Heller Ehrman. We disagree. Jones Day specifically undertook to disclose the transaction and, having done so, is not at liberty to conceal a material term. Even where no duty to disclose would otherwise exist, “where one does speak he must speak the whole truth to the end that he does not conceal any facts which materially qualify those stated. [Citation.] One who is asked for or volunteers information must be truthful, and the telling of a half-truth calculated to deceive is fraud.” (Cicone v. URS Corp., supra, 183 Cal.App.3d atp. 201; Shafer, supra, 107 Cal.App.4th at p. 72.)

Jones Day insists this case is controlled by B.L.M. v. Sabo & Deitsch (1997) 55 Cal.App.4th 823 [64 Cal.Rptr.2d 335] (B.L.M.), and that B.L.M. held that defendant attorneys owed no duty of care to the adverse party when they provided an opinion on a material aspect of the transaction at issue. Jones Day misconstrues B.L.M., a case with which we have no quarrel. The defendant lawyers in B.L.M. specifically stated an opinion on a material point in the transaction on which third party B.L.M. relied. The court concluded that “it would be inappropriate to hold an attorney liable to a third party for a legal opinion which the third party could not, under the Rules of Professional *293Conduct, have contracted to obtain from that attorney.” (B.L.M., supra, 55 Cal.App.4th at p. 839.) The court therefore held that B.L.M.’s reliance on the legal opinion of another party’s lawyers “was not justifiable under the facts alleged . . . .” {Ibid.) The court specifically stated: “We do not suggest that an attorney should be exempt from liability for negligent misrepresentation under circumstances in which a nonattomey could be held liable; we merely decline to extend professional liability under a negligent misrepresentation theory to individuals who are not clients of the attorney.” (Ibid., fn. omitted.)

B.L.M. is entirely inapposite. First, plaintiff B.L.M.’s claims were grounded solely in professional negligence—not fraud. On appeal, B.L.M. argued it should be permitted to proceed against the attorneys under a theory of negligent misrepresentation—not fraud. The court reviewed that contention, and ultimately concluded B.L.M. failed to sufficiently allege that the lawyers had the intent to induce BJL.M.’s reliance on their representations, or that the reliance of B.L.M. was justifiable “under the circumstances of the case.” {B.L.M., supra, 55 Cal.App.4th at p. 835.) Second, as the court in B.L.M. pointed out, third parties may recover against an attorney under a negligent misrepresentation theory, in cases involving misrepresentations of fact rather than legal opinions. {Id. at pp. 839-840.) The case under review involves the lawyers’ alleged concealment of a material fact in a transaction the lawyers undertook to disclose—not the expression of an inaccurate legal opinion as in B.L.M. Consequently, Jones Day can take no comfort from B.L.M., which is in no way inconsistent with our conclusion here. Certainly Jones Day had no professional duty of care to Vega as an adverse party in the merger transaction. However, as in Shafer, Jones Day did have the same duty others have “ ‘not to defraud another, even if that other is an attorney negotiating at arm’s length.’ ” {Shafer, supra, 107 Cal.App.4th at p. 71, quoting Cicone v. URS Corp., supra, 183 Cal.App.3d at p. 202.)

Jones Day contends that Shafer is irrelevant, and suggests the result there was due to “the peculiar circumstances.” In Shafer, the court held that an attorney, who was retained by an insurance company to provide coverage advice in a lawsuit against its insured, could be held liable to the plaintiffs in that lawsuit for making a fraudulent statement about coverage. (Shafer, supra, 107 Cal.App.4th at p. 59.) This case is different, Jones Day says, because Vega has not alleged an affirmative misstatement of fact made to him by Jones Day, and because Vega cannot allege any “special circumstances that would give rise to an independent duty of disclosure owed by Jones Day to him.”8 Neither of these asserted differences assists Jones Day. First, Shafer *294indeed involved an affirmative false statement, while this case involves the concealment or suppression of material facts. However, we can deduce no reason why a lawyer may be liable for one form of fraud but not the other. (See Lovejoy v. AT&T Corp. (2001) 92 Cal.App.4th 85, 97 [111 Cal.Rptr.2d 711] [it is established by statute “ ‘that intentional concealment of a material fact is an alternative form of fraud and deceit equivalent to direct affirmative misrepresentation,’ ” quoting Stevens v. Superior Court (1986) 180 Cal.App.3d 605, 608 [225 Cal.Rptr. 624]]; 5 Witkin, Cal. Procedure, supra, § 678, p. 136 [active concealment or suppression of facts is the equivalent of a false representation].) Second, Jones Day’s invocation of the principle that fraud based on nondisclosure requires an “independent duty of disclosure” is erroneous. In some but not all circumstances, an independent duty to disclose is required; active concealment may exist where a party “[w]hile under no duty to speak, nevertheless does so, but does not speak honestly or makes misleading statements or suppresses facts which materially qualify those stated.”* *******9 (BAJI No. 12.37; Cicone v. URS Corp., supra, 183 Cal.App.3d at p. 201 [“[o]ne who is asked for or volunteers information must be truthful, and the telling of a half-truth calculated to deceive is fraud”].) Providing a disclosure schedule which deliberately omitted material facts seems clearly to fit this category.

2. Justifiable reliance.

Jones Day argues that publicly available information cannot form the basis for a concealment claim, and Vega, with reasonable diligence, could have known about the “toxic” stock provisions. Jones Day points out that Vega had notice, in the consent form he signed, that a “Certificate of Designation” regarding the $10 million investment and its terms would be filed with the *295Delaware Secretary of State at some time in the future, and that this certificate, containing all the financing terms, was in fact filed two weeks before the merger closed.10

Jones Day’s argument fails on two counts. First, the contention that publicly available information cannot form the basis for a concealment claim is mistaken. The mere fact that information exists somewhere in the public domain is by no means conclusive. (See, e.g., Seeger v. Odell (1941) 18 Cal.2d 409, 414-415 [115 P.2d 977] [a plaintiff is not barred by constructive notice of a public record which would reveal the true facts].) Second, the question in a nondisclosure case is whether the defendant knows of material facts, and also knows that those facts are neither known nor readily accessible to the plaintiff.* 11 (See BAJI, No. 12.36, f 4.) In this case, Jones Day knew about the “toxic” provisions of the financing, and knew those facts were unknown to Vega unless, and only to the extent that, Jones Day and/or Transmedia disclosed those terms. Indeed, the point of disclosing material information in a transaction is that it is not otherwise available to the other side. Jones Day stated its desire to disclose the $10 million financing transaction, and then allegedly provided a sanitized disclosure, without the “toxic” terms. Questions as to whether Jones Day intentionally concealed that information in order to induce Vega to believe the transaction was “standard,” and whether the consent form indicating that a certificate regarding the investment and its terms would be filed in Delaware in the future made the “toxic” terms reasonably accessible to Vega, are questions of fact to be resolved on the evidence, not as a matter of law on a demurrer.

3. Reliance and causation.

Jones Day argues Vega cannot establish that nondisclosure of the “toxic” terms of the $10 million third party financing resulted in any damage. This is because (1) Vega agreed to exchange his Monsterbook stock for Transmedia stock on March 8, 2000, before the third party financing transaction arose and before he consented to it, and (2) Vega “concedes” in his complaint that *296Transmedia “would have gone out of business” without the $10 million investment. This claim is puzzling at best. First, while Vega agreed to exchange his stock on March 8, he may have had good grounds to rescind the agreement if the “toxic” terms of the financing had been disclosed. This is not a point that can be determined on a demurrer. Second, Jones Day quotes only part of the sentence in which Vega “concedes” Transmedia would have gone out of business without the financing. The complaint alleges that disclosure of the “toxic” terms of the financing “would have killed the acquisition,” and that “[without the acquisition,” Transmedia would not have obtained the financing and would have gone out of business. We fail to see how these allegations show Vega was not harmed by the failure to disclose the “toxic” terms of the financing. Quite the contrary. Vega alleges that had full disclosure been made, he would not have exchanged his valuable Monsterbook stock for the “toxic” Transmedia stock. Those allegations, if true, show the nondisclosure resulted in damage.

4. Requisite particularity.

The trial court also sustained the demurrer on the ground Vega failed to allege the cause of action “with the requisite degree of specificity.” Jones Day argues Vega has not alleged “(1) who, (2) said what, (3) to whom, (4) when, and (5) in what manner,” and waived the opportunity to replead.12 Again we disagree. The pertinent question in a concealment case is not who said what to whom; the question, among others, is whether Jones Day, in undertaking to disclose the $10 million financing, intentionally concealed its “toxic” terms from Vega and Monsterbook so that they would proceed with the transaction. The complaint sufficiently apprises Jones Day of the facts of Vega’s fraud claim to allow Jones Day to prepare its defense. (See Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216 [197 Cal.Rptr. 783, 673 P.2d 660].)

5. Standing to sue.

Jones Day contends Vega has no standing to sue Jones Day for fraud because his claims are “derivative” claims. In a tortuous argument, Jones Day concludes that because Vega agreed to accept Transmedia stock before the *297third party financing transaction arose, the gravamen of his complaint “must be for the diminution in the value of the Transmedia stock” he acquired, which was caused by Transmedia’s entering into the private stock transaction. This, Jones Day asserts, is a classic example of a derivative claim because the harm to Vega is the same harm suffered by every other Transmedia or Monsterbook shareholder.

Jones Day is mistaken. A derivative suit is a suit brought on behalf of a corporation for injury to the corporation, often for breach of fiduciary duty, mismanagement or other wrongdoing by corporate officers or directors, or for wrongs against the corporation by third parties. (See Friedman, Cal. Practice Guide: Corporations (The Rutter Group 2004) f| 6:602 & 6:603, pp. 6-128.1 to 6-128.2.) An action is derivative “ ‘if the gravamen of the complaint is injury to the corporation, or to the whole body of its stock and property without any severance or distribution among individual holders, or it seeks to recover assets for the corporation or to prevent the dissipation of its assets.’ ” (Jones v. H.F Ahmanson & Co. (1969) 1 Cal.3d 93, 106 [81 Cal.Rptr. 592, 460 P.2d 464], citing Gagnon Co., Inc. v. Nevada Desert Inn, Inc. (1955) 45 Cal.2d 448, 453 [289 P.2d 466].) This is not such a case. Vega alleges that Jones Day deceived him into exchanging his valuable stock in Monsterbook for worthless stock in Transmedia. As in Jones, Vega “does not seek to recover on behalf of the corporation for injury done to the corporation” by Jones Day. (Jones v. H.F. Ahmanson & Co., supra, 1 Cal.3d at p. 107.) Instead, “the gravamen of [his] cause of action is injury to [himself] . . . .” (Ibid.)13

*2986. Statute of limitations.

Jones Day argues that Vega’s fraud claim is barred by the three-year statute of limitations.14 Again, we disagree.

Vega alleged he first discovered the “toxic” terms of the $10 million financing transaction on December 14, 2000, when a Transmedia press release revealed that the terms of the financing had included a “toxic” stock provision. He filed suit on May 12, 2003. Jones Day argues the three-year statute expired no later than March 28, 2003, three years after the filing in Delaware of the “Certificate of Designation” containing all the terms of the transaction. Jones Day recognizes that the statute of limitations in a fraud action does not begin to run “until the discovery, by the aggrieved party, of the facts constituting the fraud . . . .” (Code Civ. Proc., § 338, subd. (d).) However, it argues Vega should have discovered the “toxic” terms of the financing on March 28, 2000, since the filing of the certificate in Delaware put him on inquiry notice.

The rule is that the statute commences to run “only after one has knowledge of facts sufficient to make a reasonably prudent person suspicious of fraud, thus putting him on inquiry.” (Hobart v. Hobart Estate Co. (1945) 26 Cal.2d 412, 437 [159 P.2d 958].) The means of knowledge are equivalent to knowledge “only where there is a duty to inquire, as where plaintiff is aware of facts which would make a reasonably prudent person suspicious.”15 (Hobart v. Hobart Estate Co., supra, 26 Cal.2d at p. 438.) We cannot say, as a matter of law, that Vega’s knowledge that the $10 million financing transaction would occur, standing alone, should have made him “suspicious of fraud,” or suspicious that the transaction might contain “toxic” terms. Whether other circumstances exist which, in conjunction with knowledge of the existence of the financing transaction, would have made a prudent person suspicious is a question that cannot be resolved on demurrer.

7. Res judicata.

Finally, Jones Day contends that Vega’s claims are barred by the doctrine of res judicata, because Jones Day obtained summary judgment in its favor *299on fraud claims in earlier lawsuits brought by three other shareholders, who subsequently waived, abandoned and dismissed their respective appeals. Jones Day argues Vega was in privity with each of those three shareholders, because he is also a former shareholder in Monsterbook, his fraud claim is the same as their claims, he knew about their lawsuits, and he is using the same attorney. This relationship, Jones Day contends, is sufficiently close to justify application of the principle of preclusion. Again, we cannot agree.

The doctrine of res judicata precludes parties or their privies from relitigating issues decided in a prior action in which a final judgment on the merits was entered. While Jones Day obtained summary judgment on fraud claims by three other shareholders, Vega was not a party to those lawsuits. The concept of privity has been expanded to include “a relationship between the party to be estopped and the unsuccessful party in the prior litigation which is ‘sufficiently close’ so as to justify application of the doctrine of collateral estoppel.” (Clemmer v. Hartford Ins. Co. (1978) 22 Cal.3d 865, 875 [151 Cal.Rptr. 285, 587 P.2d 1098].) However, “[notwithstanding expanded notions of privity,” due process requirements must be satisfied. (Ibid.) The cases uniformly state that, in addition to an identity or community of interest between the party to be estopped and the losing party in the first action, and adequate representation by the latter, “the circumstances must have been such that the party to be estopped should reasonably have expected to be bound by the prior adjudication.” (Clemmer v. Hartford Ins. Co., supra, 22 Cal.3d at p. 875.)

We discern no basis for concluding Vega “should reasonably have expected to be bound by” the adjudication of lawsuits in which he did not participate in any way, in which he had no proprietary or financial interest, and over which he had no control of any sort. (See Lynch v. Glass (1975) 44 Cal.App.3d 943, 949 [119 Cal.Rptr. 139] [“it cannot be said that appellants should reasonably have expected to be bound by the prior adjudication”; although appellants “were fully aware of the prior litigation, the appearance of one of them as a witness gave them no power to control any aspect of the case”]; Aronow v. LaCroix (1990) 219 Cal.App.3d 1039, 1052 [268 Cal.Rptr. 866] [where plaintiff was litigant, attorney and witness at various stages of prior case, but did not participate throughout, her connection with prior case “though faffing short of the power to control, was so close that she should reasonably expect to be bound by the result”].) The only relationship between Vega and the prior lawsuit is that he and the plaintiffs in those suits were shareholders in the same company. We are aware of no precedent for finding this to be a “sufficiently close” relationship to justify application of the principle of preclusion, and we decline to create one.

*300DISPOSITION

The order dismissing the complaint, construed as a judgment of dismissal, is reversed and the cause is remanded for further proceedings. Appellant is entitled to recover his costs on appeal.

Cooper, P. J., and Rubin, J., concurred.

A petition for a rehearing was denied August 30, 2004, and respondent’s petition for review by the Supreme Court was denied October 27, 2004. Chin, J., was of the opinion that the petition should be granted.

ORI BRAFMAN, Plaintiff and Appellant, v. WILSON SONSONI GOODRICH & ROSATI P.C., PAUL YANOSY, AND RACHEL PROFFITT, Defendants and Respondents.

No. A153595.

Court of Appeals of California, First District, Division Four.

Filed May 28, 2019.

Appeal from the San Francisco City & County, Superior Court No. CGC16550401.

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 8.115

BROWN, J.

The trial court granted a motion for summary judgment brought by Wilson Sonsini Goodrich & Rosati (WSGR), Paul Yanosy, and Rachel Proffitt. Contending that triable issues of fact remain and that the trial court incorrectly declined to order certain discovery, plaintiff Ori Brafman appeals the resulting judgment dismissing his case. Brafman also contends the trial court abused its discretion by denying him leave to file a second amended complaint. We affirm.

BACKGROUND

In 2008, Ori Brafman and Peter Sims started "an informal network of business authors to share advice and best practices around publishing and paid speaking." In December 2014, they turned the informal network into a start-up business named "Silicon Guild" and hired a law firm to form a limited liability company (LLC). Brafman and Sims agreed to split the ownership interest evenly.

Six months later, Brafman and Sims decided they instead needed to form a C corporation in anticipation of fundraising. Sims, who was charged with handling legal matters for Silicon Guild, contacted WSGR, a corporate law firm, to assist with incorporating Silicon Guild. On May 26, 2015, Sims signed an engagement agreement with WSGR on behalf of Silicon Guild. The engagement agreement explained that WSGR had been "retained to advise Silicon Guild (the `Company') with respect to formation and general corporate matters." Although the engagement agreement did not specify that Silicon Guild was already an LLC, it limited the scope of representation to "the Company, and not any of its affiliates, owners, or agents, or any of the individuals associated with the Company." (Italics added.) It further advised that WSGR's representation of Silicon Guild did not mean that it "represent[ed] any of the Company's parents, subsidiaries, employees, officers, directors, shareholders, or founders." Sims emailed a copy of the engagement agreement to Brafman later that day.

Soon after the engagement agreement was executed, WSGR learned that Sims and Brafman had already formed Silicon Guild LLC and realized that it needed to convert Silicon Guild LLC to a C corporation.

Throughout the incorporation process, WSGR primarily communicated with Sims and rarely communicated with Brafman. WSGR only communicated with Brafman about Silicon Guild's incorporation and never worked for Brafman in any other capacity.

During the next few months, Silicon Guild signed up seven customers who paid $50,000 each for membership in Silicon Guild, which Brafman refers to as Silicon Guild's "lucrative" corporate membership line. Approximately three months later, the relationship between Sims and Brafman deteriorated after Sims said he would no longer agree to equal ownership of the soon-to-be incorporated Silicon Guild. Instead, with the help of WSGR, Sims drafted a proposal in which Sims would keep 90 percent of the corporation, Brafman would keep 5 percent, and two other individuals would split the remaining 5 percent.

Within a couple of weeks, Sims and Brafman entered into mediation to resolve their ownership dispute. During that mediation, Sims hired WSGR to incorporate Parliament, a new company with the same purpose as Silicon Guild. Sims signed an engagement agreement with WSGR to incorporate Parliament, which was similar to the engagement agreement he had signed on behalf of Silicon Guild. Although it was assisting with Parliament's incorporation, WSGR states it did not know or believe, and had no reason to know or believe, that Parliament was intended to compete with Silicon Guild. Rather, WSGR claims it took only "ministerial steps to incorporate Parliament."

Soon after it agreed to incorporate Parliament and during Brafman's and Sims' mediation, WSGR sent Brafman and Sims an email in which it wrote that it understood "that Silicon Guild is now ending its relationship with WSGR, and WSGR will be engaged by [P]arliament, [I]nc. going forward . . . If one of you would please reply to this email with `confirmed' or similar, we will use this as confirmation of the termination." Although by this point, Brafman had learned of Sims' efforts to form Parliament, he did not seek a temporary restraining order or injunction to stop Sims or WSGR's actions with respect to Parliament.

Three months after mediation began, Brafman sold his interest in Silicon Guild to Sims, and mediation ended with a release covering Sims, Silicon Guild LLC, and Parliament.

Less than two months after settling the dispute, Brafman filed his initial complaint against WSGR. Approximately a year and a half later, Brafman filed a first amended complaint (FAC) asserting the following causes of action: (1) breach of fiduciary duty, (2) conspiracy to breach a fiduciary duty, (3) legal malpractice, (4) constructive fraud, (5) intentional fraud, (6) fraudulent concealment of conflicts of interest, and (7) conspiracy to commit fraud.[1] WSGR requested to file a motion based on its lack of duty to Brafman in June 2017. WSGR moved for summary judgment on the FAC two months later. The trial court heard oral argument on November 16, 2017. The following day, the trial court issued an order granting WSGR's motion for summary judgment, finding that WSGR owed Brafman no duty and that WSGR was entitled to judgment because Brafman's claims required proof of such a duty. Soon after, Brafman filed a motion for leave to file a second amended complaint (SAC), which the trial court denied. This appeal followed.

DISCUSSION

I. Summary Judgment

Brafman claims the trial court should have denied WSGR's motion for summary judgment because triable issues of material fact remained. We review a trial court's grant of summary judgment de novo, "considering `all of the evidence set forth in the [supporting and opposition] papers, except that to which objections have been made and sustained by the court, and all [uncontradicted] inferences reasonably deducible from the evidence.'" (Artiglio v. Corning Inc. (1998) 18 Cal.4th 604, 612.) We must also consider all evidence in the light most favorable to the nonmoving party. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.) "In independently reviewing a motion for summary judgment, we apply the same three-step analysis used by the superior court. We identify the issues framed by the pleadings, determine whether the moving party has negated the opponent's claims, and determine whether the opposition has demonstrated the existence of a triable, material factual issue." (Silva v. Lucky Stores, Inc. (1998) 65 Cal.App.4th 256, 261.)

Brafman claims the following triable issues of fact remain: whether WSGR owed him a fiduciary duty; whether Brafman had standing to sue; whether the FAC stated causes of action; whether the engagement agreement was enforceable; and whether Brafman was provided an opportunity for meaningful oral argument.

A. WSGR Owed Brafman No Duty

Brafman maintains that he had an attorney-client relationship with WSGR by virtue of WSGR's work regarding Silicon Guild, that WSGR owed him a fiduciary duty, and that WSGR breached that duty as alleged in each of the FAC's causes of action. Brafman alternatively claims WSGR owed him a duty as a non-client and breached that duty.

"[A]n attorney's duty to his or her client depends on the existence of an attorney-client relationship. If that relationship does not exist, the fiduciary duty to a client does not arise." (Fox v. Pollack (1986) 181 Cal.App.3d 954, 959.) An attorney-client relationship and its attendant duties can arise by inference from the conduct of the parties, even without payment or a formal agreement. (Lister v. State Bar (1990) 51 Cal.3d 1117, 1126.) However, an attorney-client relationship cannot be declared unilaterally; a purported client's mere belief that an attorney-client relationship existed is not sufficient to create such a relationship, as that belief must have been reasonably induced by representations or conduct by the attorney. (Fox, supra, 181 Cal.App.3d at 959.) An implied attorney-client relationship is based on the circumstances of each case, including the parties' conduct and intentions. (Responsible Citizens v. Superior Court (1993) 16 Cal.App.4th 1717, 1732-1733 (Responsible Citizens); Miller v. Metzinger (1979) 91 Cal.App.3d 31, 39.) Accordingly, analyzing the intent and conduct of the parties is critical to determining whether an implied attorney-client relationship exists. (Lasky, Haas, Cohler & Munter v. Superior Court, 172 Cal.App.3d 264, 285.)

As WSGR never agreed to represent Brafman as an individual, he argues that an implied relationship was created based on WSGR's conduct. We disagree. WSGR drafted an engagement agreement outlining the scope of representation in which it agreed to incorporate Silicon Guild. The engagement agreement limited the scope of representation to formation and corporate matters and expressly disclaimed representation of any person or entity other than the company Silicon Guild. Brafman received a copy of this engagement agreement, in which WSGR limited its representation to Silicon Guild. Brafman continued working on matters related to Silicon Guild for more than three months after receiving the engagement agreement. During this time, WSGR communicated primarily with Sims and rarely with Brafman. Brafman's contact with WSGR related solely to WSGR's work on Silicon Guild. WSGR did not perform any other work for Brafman or have any interactions with Brafman that would have led him to reasonably believe WSGR represented him personally in any capacity. The parties' conduct here does not suggest that an implied attorney-client relationship existed.

Relying on Responsible Citizens, supra, 16 Cal.App.4th 1717, Brafman contends that his relationship with WSGR should be analyzed as if (1) Silicon Guild LLC was the client and (2) Silicon Guild LLC was a partnership with him as a partner, because LLCs are viewed as more akin to partnerships than corporations. Even assuming these two necessary predicates to Brafman's theory, his assertion that WSGR owed him a duty would still fail. To analyze whether an implied attorney-client relationship was created between a partner and a partnership's counsel, the court must consider: (1) the size of the partnership; (2) the nature and scope of the attorney's engagement; (3) the kind and extent of contacts between the attorney and the individual partners; (4) the attorney's access to financial information of the individual partner; and (5) whether the totality of the circumstances, including the parties' conduct, implies an agreement by the partnership's counsel not to accept other representations adverse to the individual partner's personal interests. (Johnson v. Superior Court (1995) 38 Cal.App.4th 463, 476-477 (Johnson).) Applying each of these factors to his case, Brafman contends: (1) the partnership only included Sims and himself; (2) the engagement agreement was for the conversion of the LLC into a corporation for the benefit of Sims and Brafman; (3) WSGR had extensive contact with Brafman; (4) Brafman gave WSGR detailed information about his personal finances; and (5) WSGR failed to expressly tell Brafman that it only represented Silicon Guild and not his interests. But Brafman's analysis is either strained or incorrect for the last three factors. WSGR rarely communicated with Brafman. WSGR never received or reviewed Brafman's personal financial information. At best, Brafman appears to have disclosed limited personal financial information during a lunch meeting about Silicon Guild's business model as well as his and Sims' financial needs, expectations, and goals regarding Silicon Guild. WSGR never performed any legal work for Brafman in his individual capacity. And regardless of whether he read it, Brafman received the engagement agreement detailing WSGR's express intent to limit the scope of its representation to Silicon Guild, the business entity. Thus, even applying the analysis from the partnership cases cited by Brafman, Brafman's claim that he formed an implied attorney-client relationship with WSGR fails.

Brafman alternatively contends that he and Sims were WSGR's clients because WSGR could only contract with them and not a party that did not yet exist. To support this argument, Brafman relies on Civil Code section 1558, which provides that the validity of contracts requires "not only that parties should exist, but that it also be possible to identify them." Brafman cites no case applying Civil Code section 1558 to engagement agreements to incorporate yet-to-be-formed corporations.[2]

There are several problems with Brafman's contention that Civil Code section 1558 applies and entitles him to reversal of the summary judgment. First, Silicon Guild unquestionably existed as a business entity (specifically, an LLC) when the engagement agreement was signed. Alternatively, even assuming the client was the not-yet-existent C corporation and that Civil Code section 1558 renders the agreement invalid, that consequence would simply render the engagement agreement unenforceable as between Silicon Guild and WSGR. (Cf. R.M. Sherman Co. v. W.R. Thomason, Inc. (1987) 191 Cal.App.3d 559, 563 [a void contract "create[s] no right or claim whatsoever" and "`binds no one'"].) It would not establish that WSGR owed a duty to Brafman as an individual; as previously discussed, the facts belie Brafman's contention that he had an implied attorney-client relationship with WSGR under Johnson.

In addition, the engagement agreement's description of Silicon Guild as a company was sufficiently specific under Civil Code section 1558 to identify it as the contracting party. Although the engagement agreement could have provided more detail, "[t]here is an important distinction . . . between a description of a party that is inherently uncertain and indeterminate and one that is merely imperfect and capable of different applications. The former cannot be corrected, but in the latter case there may be a resort to extraneous facts to ascertain . . . to whom the description was intended to apply; and a greater or lesser probability of ascertaining such identification does not affect the validity of the [contract]." (14 Cal.Jur.3d Contracts § 105, citing Woodward v. McAdam (1894) 101 Cal. 438.) Here, given the context of who signed the agreement—Silicon Guild co-founder Peter Sims as the "point person for the legal stuff"—and when it was signed—May 26, 2015, after Sims and Brafman agreed they needed to form a C corporation to raise funds—it is clear that the client is the existing business entity, Silicon Guild (regardless of its precise status vis à vis California Corporations law), and not Brafman.

Indeed, defining the client as Silicon Guild, "the `Company,' "rather than specifying its exact corporate form, was beneficial because it allowed the engagement agreement to remain in place, even when the company's form changed—for example, from an LLC to a C corporation. It also permitted WSGR to proceed under the same engagement agreement after learning that Silicon Guild had already been formed as an LLC. As WSGR explained, the conversion from LLC to a C corporation was already "the type of work the [engagement agreement] contemplated might be necessary [] and . . . was subject to the terms of the [engagement agreement]."

The attorney-client relationship formed between Silicon Guild and WSGR is also consistent with Corporations Code section 15911.09, which provides that a converted entity is normally deemed to be the same entity that existed before the conversion. (Corp. Code § 15911.09, subd. (a).) Accordingly, a converted entity is vested with all property and rights as the pre-conversion entity. (Corp. Code § 15911.09, subd. (b).)[3] Moreover, public policy favors allowing attorneys to represent only the entity being incorporated, to avoid potential conflicts that could arise with continued representation of the newly-incorporated company and its founders after incorporation. (Vapnek, et al., California Practice Guide: Professional Responsibility (2016), Representing "start-up" corporations, § 3:107.3 (Vapnek Treatise).)

Brafman claims that the trial court failed to fully address the Vapnek Treatise on which it based its public policy justifications. Specifically, Brafman argues that Vapnek warned that "appl[ying] a `retroactive incorporation' concept" would be problematic if the incorporation was not consummated or if the "incorporating attorney gives advice to one of the future owner's about . . . [that] owner's personal interest." However, Brafman's concerns about failure to incorporate are inapplicable because Silicon Guild was incorporated in January 2016. Moreover, Brafman has not shown that WSGR gave advice to any future owner about their personal interests, because he has not cited to anything in the record supporting such a claim. Accordingly, we exercise our discretion to disregard contentions unsupported by proper page cites to the record. (Professional Collection Consultants v. Lauron (2017) 8 Cal.App.5th 958, 970.)

Brafman's argument also ignores the import of the out-of-state case law cited in the Vapnek Treatise. The Vapnek Treatise relies on Jesse v. Danforth (1992) 485 N.W.2d 63, in which the Wisconsin Supreme Court held that where (1) a person retains a lawyer for the purpose of organizing an entity, (2) the lawyer's involvement with that person is directly related to that incorporation, and (3) such entity is eventually incorporated, the entity rule applies retroactively such that "the lawyer's pre-incorporation involvement with the person is deemed to be representation of the entity, not the person." (Id. at p. 67.)[4] WSGR's representation of Silicon Guild complied with these factors because (1) WSGR was retained to incorporate Silicon Guild, (2) WSGR's involvement with Brafman and Sims concerned corporate matters for Silicon Guild, and (3) Silicon Guild was eventually incorporated. The circumstances of this case are thus consistent with the Vapnek Treatise.

Perhaps recognizing that no evidence supports his claim that he had an attorney-client relationship with WSGR, Brafman claims that he was WSGR's client pursuant to rule 3-310(C)[5] of the Rules of Professional Conduct. Citing that rule, Brafman asserts that WSGR represented Silicon Guild as well as Sims and Brafman during the incorporation process. However, Brafman mischaracterizes rule 3-310(C) of the Rules of Professional Conduct. To the extent that rule has any applicability in this case, it would not establish a relationship with Brafman, but would in fact prevent WSGR from representing both Silicon Guild and the individuals involved without their informed written consent-consent that was never obtained because the engagement agreement demonstrates WSGR's express intent to represent only "the `Company.'" (See Rules Prof. Conduct, former rule 3-310(C).)

Finally, Brafman contends that WSGR owed him a legal duty as a non-client. But Brafman cites no case law supporting his theory that attorneys have duties to non-clients in situations similar to this case. He has therefore forfeited this argument because his assertion is conclusory. (People v. Stanley (1995) 10 Cal.4th 764, 793 [reviewing courts may disregard points missing cogent legal argument].)[6]

In sum, Brafman never formed an attorney-client relationship with WSGR, and WSGR therefore owed him no duty. The only attorney-client relationship was between WSGR and Silicon Guild. The trial court did not err in granting summary judgment based on a lack of duty to Brafman.

B. WSGR Was Entitled to Summary Judgment Based on Lack of Standing

Even if the trial court erred in its analysis of WSGR's duty, summary judgment was nonetheless appropriate due to lack of standing. Summary judgment as to a cause of action was properly granted if WSGR showed either that one or more essential elements of that cause of action could not be separately established or that an affirmative defense barred recovery; if WSGR met that burden, Brafman could only defeat summary judgment by setting forth specific facts showing a triable issue of material fact. (Code Civ. Proc., § 437c, subds. (o), (p)(2).)

First, Brafman asserts that he has standing to sue WSGR because Silicon Guild's value diminished when WSGR incorporated Parliament, which in turn assumed control of Silicon Guild's only asset: its corporate membership line. Brafman further alleges that he would have received a portion of Silicon Guild's profits had Silicon Guild maintained control of its corporate membership. Brafman claims he was directly injured and can therefore sue WSGR in his individual capacity. We disagree.

A corporation is a legal entity that is distinct from its shareholders. (Merco Constr. Engineers, Inc. v. Municipal Court (1978) 21 Cal.3d 724, 729.) "Because a corporation exists as a separate legal entity, the shareholders have no direct cause of action or right of recovery against those who have harmed it. The shareholders may, however, bring a derivative suit to enforce the corporation's rights and redress its injuries when the board of directors fails or refuses to do so." (Grosset v. Wenaas (2008) 42 Cal. 4th 1100, 1108.) However, shareholders may still sue in their individual capacity when the injury is not incidental to an injury to the corporation. (Jones v. H.F. Ahmanson & Co. (1969) 1 Cal.3d 93, 107 (Jones).)

Here, Brafman alleges that his individual interests were harmed when Sims incorporated Parliament with WSGR's help and transferred Silicon Guild's successful corporate membership line to Parliament. This harm is akin to the harm alleged in PacLink Communications International v. Sup. Ct. (PacLink) (2001) 90 Cal.App.4th 958, in which three members of the eight-member PacLink LLC sued both the companies that had received PacLink LLC's assets without consideration as well as the individuals associated with those companies. (Id. at p. 961.) The PacLink plaintiffs sued in their individual capacities, because they claimed that the defendants' actions directly caused them financial injury. (Id. at p. 962.) The court disagreed and concluded that plaintiffs could only maintain a derivative action, not an individual action, because "[t]he injury was essentially a diminution in the value of [plaintiffs'] membership interest in the LLC occasioned by the loss of the company's assets. Consequently, any injury to plaintiffs was incidental to the injury suffered by the company." (Id. at p. 964.)

Like PacLink, the harm alleged here was transfer `of Silicon Guild's main asset, its corporate membership line, from Silicon Guild to Parliament purportedly without consideration. Any harm to Brafman resulted only from Silicon Guild's diminished value. As the alleged direct harm was to Silicon Guild, Brafman should have brought his claims in a derivative suit before selling his interest in Silicon Guild. (Grosset v. Wenaas, supra, 42 Cal.4th at p. 1108.) However, Brafman cannot bring a derivative suit on behalf of Silicon Guild because he no longer owns any interest in Silicon Guild. (Id. at pp. 1110-1114.)

Brafman cites several cases in support of his claim that he can sue in his individual capacity. (Jones, supra, 1 Cal.3d 93; Sutter v. Gen. Petroleum Corp. (1946) 28 Cal.2d 525 (Sutter); Crain v. Electronic Memories and Magnetics Corp., et al. (1975) 50 Cal.App.3d 509 (Crain).) Jones and Crain, however, concern harm suffered by current minority shareholders as a result of actions taken by majority shareholders. (Jones, supra, 1 Cal.3d at pp. 101, 107; Crain, supra, 50 Cal.App.3d at p. 521.) In contrast, Brafman was an equal owner of Silicon Guild, whose interest was allegedly diminished by Sims' and WSGR's actions. Sutter is similarly distinguishable. The plaintiff in Sutter was permitted to bring an individual suit because the defendants' fraud "was practiced on Sutter in the first instance and he was induced to form a corporation . . . and invest his money by reason of that fraud." (Sutter, 29 Cal.2d at pp. 531-532; see also Hilliard v. Harbour (2017) 12 Cal.App.5th 1006, 1014 [discussing Sutter and explaining that "[t]he point of the Supreme Court opinion is that while Sutter lost his investment, which was represented by the value of the stock, and its reduction in value was the measure of his loss, the damages all flowed from the defendants' tort that preceded and induced the investment".]) Here, in contrast to Sutter, there is no allegation that Brafman was induced to form and invest in Silicon Guild by reason of any fraud by WSGR. Moreover, the cases cited by Brafman are inapplicable because none of them address whether former shareholders can sue in their individual capacities. Accordingly, the harm alleged could only be addressed by a derivative suit, which Brafman indisputably lacks standing to file because he no longer owns any interest in Silicon Guild.

In sum, summary judgment was appropriate not only based on WSGR's lack of duty but also because Brafman lacked standing.

C. The Engagement Agreement Was Enforceable

Brafman also claims that WSGR's engagement agreement was unenforceable because no one from WSGR signed and sent an executed copy to Silicon Guild. This claim is belied by the record he provided to the court, which contains a copy of the engagement agreement signed by WSGR's Rachel Proffitt.

Brafman alternatively argues that the engagement agreement is invalid because he did not personally sign it, even though he concedes that Sims signed it on behalf of Silicon Guild. A contract may bind a company if it was made by someone who was expressly authorized to bind the company or had implied authority incidental to his position to bind that company. (Snukal v. Flightways Manufacturing., Inc. (2000) 23 Cal.4th 754, 780). In light of the fact that Sims signed the engagement agreement and Brafman's testimony that Sims was the "point person for the legal stuff," the trial court correctly concluded that Brafman had "authorized Sims to handle Silicon Guild's legal affairs." Using his implied authority, Sims signed an engagement agreement with WSGR and bound Silicon Guild. Brafman's separate signature was thus unnecessary.

And again, whether there was an enforceable engagement agreement binding Silicon Guild has no impact on Brafman's inability to establish that he, as an individual, had an attorney-client relationship with WSGR. Accordingly, the alleged lack of signatures on the engagement agreement does not present a triable issue of material fact warranting reversal.

D. Brafman Received Meaningful Oral Argument

Finally, Brafman claims that summary judgment must be reversed because the trial court deprived him of an opportunity to have meaningful oral argument. Brafman contends that the argument was insufficient because it lasted only 11 minutes and because the court declined to provide guidance as to any particular issues or concerns on which counsel should focus. In so arguing, Brafman relies on Mediterranean Construction Co. v. State Farm Fire & Casulty Co. (1998) 66 Cal.App.4th 257 (Mediterranean), an insurance case in which State Farm moved for and was granted summary judgment after the trial court declined to hear oral argument. (Id. at pp. 260, 264-265.) The court reversed, explaining that "[t]rial judges may not elevate judicial expediency over Code of Civil Procedure section 437c's mandate for hearings on summary judgment motions." (Id. at p. 265.) But the Court of Appeal added that its decision did not affect the trial court's "extensive discretion regarding how the hearing is to be conducted, including imposing time limits and adopting tentative ruling procedures . . . ." (Ibid.)

Mediterranean is distinguishable, however, because the trial court in this case heard oral argument. (Mediterranean, supra, 66 Cal.App.4th at pp. 260, 264-265.) In fact, the trial court placed no limitations on oral argument and asked three times whether the parties had anything further they wished to address. Brafman's counsel took the opportunity to address Silicon Guild's valuation but declined to address other issues when given additional opportunities to raise them. We therefore reject Brafman's claim that he was not provided with meaningful oral argument.

II. Discovery

In addition to his arguments regarding the grant of summary judgment, Brafman claims the trial court erroneously refused to order WSGR to produce communications relating to Silicon Guild, Sims, and Parliament. "A trial court's determination of a motion to compel discovery is reviewed for abuse of discretion." (Costco Wholesale Corp. v. Superior Court (2009) 47 Cal.4th 725, 733 (Costco).) "`The trial court's determination will be set aside only when it has been demonstrated that there was "no legal justification" for the order granting or denying the discovery in question.'" (Maldonado v. Superior Court (2002) 94 Cal.App.4th 1390, 1396-1397.)

A. Privileged Documents

WSGR asserted that much of Brafman's requested discovery was protected by the attorney-client privilege and submitted a privilege log listing the documents over which it was asserting the privilege. Brafman claims that WSGR's privilege log provided insufficient information to show the attorney-client privilege applied to each document listed and that the trial court should have ordered WSGR to supplement the information in the privilege log. Brafman relies on Code of Civil Procedure section 2031.240, subdivision (c)(1), which requires the party claiming a privilege to "provide sufficient factual information to evaluate the merits of [the privilege] claim, including, if necessary, a privilege log." But the purpose of privilege logs is to provide "a specific factual description of documents . . . to permit a judicial evaluation of the claim of privilege." (Hernandez v. Superior Court (2003) 112 Cal.App.4th 285, 292, italics added.) We have reviewed the privilege log and find that the trial court was properly satisfied that these documents were privileged. Brafman's claim that the privilege log lacked sufficient information to determine privilege fails.

B. Burden-Shifting as to Proof of Privilege

Brafman also asserts that the trial court erroneously placed on him the burden of showing that certain communications with third parties were not privileged. That contention mischaracterizes the trial court's order that WSGR had made a prima facie showing of privilege, which therefore shifted the burden back to Brafman to show the requested disclosures were not privileged. (Costco, supra, 47 Cal.4th at p. 733, citing Evid. Code §917.) As Brafman has failed to show that the disclosures were not privileged after WSGR met its initial burden to establish a privilege applied, we conclude there is no merit to Brafman's claim that the trial court improperly shifted the burden regarding privilege.

C. Production of Privilege-Log Entries

Brafman also contends the trial court should have ordered WSGR to produce the documents listed in privilege log entries that were created after WSGR stopped working on Silicon Guild's incorporation in September 2015. But Brafman fails to recognize that while WSGR temporarily stopped working to incorporate Silicon Guild, it eventually resumed its work and incorporated Silicon Guild in January 2016. And although WSGR established a prima facie showing of privilege, Brafman failed to make a showing that communications after September 13, 2015 between WSGR and Silicon Guild, Sims, or Parliament were not privileged. We therefore cannot conclude that the trial court abused its discretion.

D. Exceptions to Attorney-Client Privilege

Brafman further argues that the otherwise privileged attorney-client communications are discoverable because the joint-client, breach, and crime-fraud exceptions to the attorney-client privilege apply. As we have already rejected Brafman's claim that he, too, was WSGR's client, we reject Brafman's claim that the joint-client exception applies. We similarly reject his claim that the breach exception applies, because WSGR did not owe any duty to Brafman and therefore could not breach that nonexistent duty.

The only previously unaddressed exception is the crime-fraud exception. To invoke the crime-fraud exception to the attorney-client privilege, "the proponent must make a prima facie showing that the services of the lawyer `were sought or obtained' to enable or to aid anyone to commit or plan to commit a crime or fraud." (BP Alaska Exploration, Inc. v. Superior Court (1988) 199 Cal.App.3d 1240, 1262.) Brafman asserts the crime-fraud exception applies because "Sims formed a business [Parliament] that competed with [Silicon Guild] and he and WSGR concealed this information to prevent Brafman from taking action to stop it." Yet the uncontroverted evidence shows that WSGR was unaware that Parliament would compete with Silicon Guild. Moreover, WSGR did not conceal its involvement with Parliament and even sent an email to Brafman and Sims indicating that it would be working on "[P]arliament [I]nc." two months before Brafman sold his interest in Silicon Guild. Brafman therefore cannot establish that the crime-fraud exception to the attorney-client privilege applies and has accordingly failed to pierce WSGR's assertion of the attorney-client privilege.

E. Sanctions

Brafman contends that the trial court should have imposed sanctions after WSGR refused to meet and confer about discovery requests. He then argues that Code of Civil Procedure § 2023.020 requires the imposition of sanctions for failure to make a good faith attempt to meet and confer."

"`[A] reasonable and good faith attempt at informal resolution [as necessary to avoid discovery sanctions] entails something more than bickering with [opposing] counsel . . . . Rather, the law requires that counsel attempt to talk the matter over, compare their views, consult, and deliberate."'" (Ellis v. Toshiba America Information Systems, Inc. (2013) 218 Cal.App.4th 853, 880, citing Clement v. Alegre (2009) 177 Cal.App.4th 1277, 1294.)

Brafman requested sanctions after he sent a letter requesting discovery to WSGR's counsel, dated February 9, 2017. In that letter, Brafman requested (1) all documents reflecting communications between Duane Morris LLP (the law firm representing WSGR in this case) and Peter Sims after December 29, 2015, concerning the subject matter of this litigation; (2) all documents reflecting communications between Duane Morris LLP and Mark Parnes, general counsel to WSGR, after December 29, 2015, concerning the subject matter of this litigation; (3) all documents reflecting communications between WSGR and Peter Sims after December 29, 2015, concerning the subject matter of this litigation; (4) all documents reflecting communications between WSGR's Paul Yanosy[7] and Parnes after December 29, 2015, concerning the subject matter of this litigation; (5) all documents reflecting communications between WSGR's Rachel Proffitt[8] and Sims after December 29, 2015, concerning the subject matter of this litigation; (6) all documents reflecting communications between Duane Morris LLP and Sims after December 29, 2015, concerning the subject matter of this litigation; (7) identification of all documents, including emails reviewed by Parnes in preparation for the letter sent to Brafman's counsel on January 26, 2016, because the privilege was purportedly waived as Parnes "did not represent WSGR's clients" but still "view[ed] privileged documents." Each request included WSGR's responses, which asserted that the requests were overbroad, vague, and ambiguous and that either the attorney-client privilege or the joint-defense privilege and common interest doctrines applied. The letter further requests additional information from two WSGR attorneys following their depositions, including their assertions of privilege, and a deposition of WSGR's general counsel, Mark Parnes.

Brafman's requests ignored the trial court's earlier attempts to explain to Brafman that the attorney-client privilege protected much of the discovery he requested. For example, at a December 16, 2016 hearing, the trial court and Brafman's counsel extensively discussed the attorney-client privilege as it applied to Brafman's requested discovery. Specifically, the trial court explained that the attorney-client privilege extended to Sims' communications with WSGR because "[a]ny entity can only act through human beings. Sims is one of those human beings that falls within the privilege." The trial court even expressed its frustration with Brafman's counsel's blanket assertions that the attorney-client privilege did not apply, describing his argument as "more ipse dixit," meaning, "it is because I say it is."

That discussion about applicable privilege continued at a February 17, 2017 hearing, which took place shortly after Brafman sent the discovery letter, as to which he now seeks sanctions. At this hearing, WSGR's counsel again addressed the applicable privilege, explaining, "There are documents requested here as to which the Court has already ruled privileges apply." The trial court again discussed how the attorney-client privilege protected much of requested discovery and expressed concern about Brafman's understanding of that privilege. It concluded that Brafman's counsel appeared to be suggesting that, "whenever somebody . . . talks to their client before filing a complaint or talks to their client before making a statement, all privilege is waived in those entire conversations because they filed the complaint or made the statement. [¶] . . . I just don't think that's the law, and the case [Brafman's counsel] cited . . . talks about disclosing something to the government tax authorities." The court then noted that Brafman's counsel had cited only that one case.

During that same February 2017 hearing, the trial court directly discussed two of Brafman's requests and whether the common interest doctrine applied. WSGR's counsel explained that Duane Morris LLP and Sims had only exchanged a few emails and that the joint-defense privilege and common interest doctrine applied to these communications. WSGR's counsel further explained that no other responsive documents existed. At the end of the February 2017 hearing, the trial court requested that Brafman's counsel file a motion, so it could address whether the attorney-client or other privileges protected the discovery he was seeking. The parties then met and conferred again outside the courtroom for 10 minutes.

In sum, it appears that Brafman's counsel and WSGR's counsel communicated sufficiently, given the history and context of the arguments as to privilege. WSGR communicated in prior proceedings about the privilege applicable to Brafman's discovery requests, in prior written correspondence as evidenced in the February 9, 2017 letter and outside the courtroom after the February 2017 hearing. Although Brafman did not like WSGR's responses to his numerous and repeated discovery requests, communication between the parties was sufficient in these circumstances, and sanctions were therefore inappropriate.

III. Disqualifying Counsel

Brafman contends that Duane Morris LLP should have been disqualified because it assisted WSGR with reviewing attorney-client privileged documents and drafting a privilege log. The only support Brafman cites is inapposite, as it concerns an attorney who inadvertently obtained a document that he quickly recognized was his opposing counsel's work product, and who thereafter violated his ethical duties by copying, distributing, and making use of the work product while deposing the opposing party's experts. (Rico v. Mitsubishi Motors Corp. (2007) 42 Cal.4th 807, 812, 816-819.) No similar allegation exists here. Having been presented with no applicable law, we decline to hold that Duane Morris LLP should have been disqualified.

...

DISPOSITION

The judgment is affirmed.

POLLAK, P. J., TUCHER, J. concurs.

[1] Each of these causes of action alleges that WSGR owed a duty to Brafman arising out of their purported attorney-client relationship. The First through Fourth as well as the Sixth and Seventh Causes of Action all allege that WSGR owed a duty to Brafman based on an attorney-client relationship. The Fifth Cause of Action is phrased differently but similarly alleges a duty based on an attorney-client relationship, stating: "By virtue of the relationship between Defendants [WSGR; Paul Lionel Yanosy, Esq.; Rachel Proffitt, Esq.; and Does 2 through 20] and Plaintiff established by Plaintiff's co-ownership of [Silicon Guild] LLC and Defendants' legal work pertaining to the conversion of [Silicon Guild] LLC to a C corporation, Defendants owed Plaintiff a duty to disclose all material facts relating to [Silicon Guild] LLC."

[2] In fact, at least one case has limited the application of Civil Code section 1558 to executory contracts. (People v. Bradford (1955) 130 Cal.App.2d 606, 608.) The evidence is undisputed that the engagement agreement was an executed contract.

[3] This conclusion is also consistent with case law holding that a corporation may be bound by an attorney-services contract entered into prior to its incorporation, where it impliedly adopted the agreement "by knowledge and acquiescence" after it was incorporated. (Abbott v. Limited Mutual Compensation Ins. Co. (1938) 30 Cal.App.2d 157, 162-163; cf. David v. Southern Import Wine Co. (1936) 171 So. 180, 182 [pre-incorporation agreement for attorney to incorporate the company ratified by subsequent receipt of benefits, specifically, "the actual creation of the corporation itself"].) Here, Silicon Guild was incorporated in January 2016, and it thereafter adopted and continued to accept the benefits of its engagement agreement with WSGR by later having WSGR file papers to dissolve Silicon Guild, Inc. This sequence of events supports WSGR's position at oral argument that the attorney-client relationship between Silicon Guild and WSGR was "paused" in October 2015, but not terminated.

[4] The Wisconsin State Supreme Court based its decision on its rules of professional conduct, specifically Wisconsin Supreme Court rules 20:1.6, 20:1.7, and 20.13, which in turn are based on the American Bar Association's (ABA) Model Rules of Professional Conduct (Model Rules), rules 1.6, 1.7, and 1.13. We recognize that "California has not adopted the ABA Model Rules [citation], [but note that] they may serve as guidelines absent on-point California authority or a conflicting state public policy [citation]." (Walker v. Apple, Inc., (2016) 4 Cal.App.5th 1098, 1109, fn. 4, citing City and County of San Francisco v. Cobra Solutions, Inc. (2006) 38 Cal.4th 839, 852.)

[5] Former rule 3-310(C), of the Rules of Professional Conduct provides: "A member shall not, without the informed written consent of each client: [¶] (1) [a]ccept representation of more than one client in a matter in which the interests of the clients potentially conflict; or [¶] (2) [a]ccept or continue representation of more than one client in a matter in which the interests of the clients actually conflict; or [¶] (3) [r]epresent a client in a matter and at the same time in a separate matter accept as a client a person or entity whose interest in the first matter is adverse to the client in the first matter." (Rules Prof. Conduct, rule 3-310(C).) Effective, November 1, 2018, the principles set forth in rule 3-310(C) were incorporated into rule 1.7 of the Rules of Professional Conduct.

[6] Moreover, even his intentional fraud case of action, as pled, was based on an attorney-client relationship between WSGR and Brafman purportedly giving rise to a "duty to disclose [to Brafman] all material facts relating to [the] LLC."

[7] Paul Yanosy was one of the WSGR attorneys who worked on incorporating Silicon Guild and Parliament. He has since left WSGR.

[8] Rachel Proffitt was one of the WSGR attorneys who worked on incorporating Silicon Guild and Parliament.

William D. Quarles, Jr.

MFI-DPLH, LLC, Plaintiff,

v.

JESSE H. INGRAM, ESQUIRE, et al., Defendants.

Civil No. WDQ-09-2358.

United States District Court, D. Maryland, Northern Division.

January 20, 2010.

MEMORANDUM OPINION

WILLIAM D. QUARLES Jr., District Judge.

MFI-DPLH, LLC ("DPLH") sued Jesse H. Ingram, Esq. ("Ingram"), Jesse H. Ingram, PLLC ("Ingram PLLC"), and Ingram & Associates, LLC ("Ingram & Associates") for breach of contract, breach of fiduciary duty, misuse of trust money, and negligence. Pending are DPLH's motion for partial summary judgment and Ingram and Ingram PLLC's motion to implead Steven Jones and The Jones Group Holdings, LLC. For the following reasons, the motion for partial summary judgment will be granted in part and denied in part, and the motion to implead will be granted.

I. Background

DPLH is a Florida limited liability company. Shawn R. McIntyre Aff. ¶ 1, Oct. 6, 2009. Ingram is a Columbia, Maryland attorney. See Pl.'s Mot. Summ. J., Ex. 2. Ingram PLLC is a Maryland professional limited liability company. Compl. ¶ 4.[1]Ingram & Associates is a Columbia, Maryland law firm. Pl.'s Reply to Ingram & Associates' Opp., Ex. 1. Ingram is Of Counsel to Ingram & Associates. Id.; Pl.'s Reply to Ingram & Associates' Opp., Ex. 1.[2]

In April 2009, DPLH wanted to escrow $250,000, which was to be paid to Steven Jones and The Jones Holding Group (collectively, "Jones") at DPLH's instruction.[3]McIntyre Aff. ¶ 2. DPLH and Jones agreed that DPLH would wire the funds to Ingram's escrow account at Bank of America. Pl's Mot. Summ. J., Ex. 3. On April 30, 2009, DPLH's attorney, Braden J. Montierth of the law firm Roetzel & Andress, emailed and faxed Ingram an agreement governing the handling of the funds. Id. The agreement was addressed to "Dr. Jesse Ingram, Ingram & Associates, LLC," contained the office address of Ingram & Associates, and was faxed to Ingram & Associates. Id.

Under the agreement, DPLH would wire into "[Ingram's] escrow account at Bank of America . . . $250,000." Id. Ingram was "instructed to hold the $250,000 in escrow barring further written direction from [Roetzel & Andress]." Id. Ingram signed and faxed the agreement to Montierth on May 1, 2009. Id. Ingram signed on behalf of "Ingram & Associates, LLC," and the facsimile transmittal sheet indicated that the fax was from "Ingram & Associates, LLC." Id. DPLH wired the funds to Ingram's account. McIntyre Aff. ¶ 4.

On August 26, 2009, DPLH requested that Ingram return the escrowed funds. Id. ¶ 5; Ex. 4. The demand letter from Stephen E. Thompson of Roetzel & Andress, stated that:

Pursuant to the direction of . . . DPLH and per the the terms of that certain Escrow Letter dated April 30, 2009 . . ., you are hereby instructed to immediately wire to our IOTA Trust Account no later than the end of business tomorrow the full amount of our client's $250,000.00 that has been held in your escrow account for the benefit of DPLH, together with any accrued interest. Id., Ex. 4. Thompson enclosed a copy of the April 30, 2009 agreement and the routing information for Roetzel & Andress's IOTA account. Id.

On August 31, 2009, Ingram emailed Thompson regarding the Demand Letter:

As you may have reason to know, the funds are no[] longer in my IOTA account. They were distributed long ago according to Mr. Steve Jones' instructions. Thus,

I was quite disturbed and perplexed to receive the Deposit Release Demand from your office! Please be informed that Mr. Jones represented to me that the business transaction between [DPLH] and [Jones] was successful and that all parties were satisfied with the outcome. Obviously, that is not the case!

I have assertively addressed this pivotal matter with Mr. Jones and . . . he represented to me on . . . August 28th that the funds will be returned to my Iota [a]ccount by the close of business. I will immediately wire those funds to your account upon receiving them.

Pl.'s Mot. Summ. J., Ex. 7. Ingram did not return the funds, id., Ex. 6 (email from Stephen E. Thompson, Esq. to Jesse H. Ingram, Esq., August 31, 2009), and Thompson sent another demand letter by email and Federal Express, id., Exs. 5, 6. Ingram emailed Thompson that he was "working relentlessly to preclude the necessity for employing the judicial process in order to return the funds," and that "[d]espite the appearance . . . [the] funds were not intentionally distributed in contravention of [the] authorization or instructions!" Id., Ex. 6. He promised to "speak with Mr. Jones [that night] about [Jones's] failed efforts to return the funds to [Ingram's] account." Id.

On September 8, 2009, DPLH sued Ingram, Ingram PLLC, and Ingram & Associates. Paper No. 1. After the suit was filed, Ingram continued to promise DPLH's lawyers that he would return the deposit. Id., Ex. 8 (email from Jesse H. Ingram, Esq. to Gary Adler, Esq., counsel for DPLH, September 18, 2009). In a September 18, 2009 email to DPLH's counsel, Ingram wrote that he was still attempting to "assist Mr. Jones in returning the funds to [Ingram, Esq.'s] escrow." Id. Ingram also stated that "should Mr. Jones fail[] to live up to his obligation to return [the] funds by the time [the] answer to your Complaint is due [,] I will satisfy that obligation and immediately pursue an action against Mr. Jones myself." Id.

On September 29, 2009, Ingram answered the Complaint. Paper No. 7. On October 6, 2009, DPLH moved for partial summary judgment on liability. Paper No. 12. On November 16, 2009, Ingram moved to implead Jones. Paper No. 20.

II. Analysis

A. DPLH's Motion for Partial Summary Judgment

1. Standard of Review

Under Rule 56(c), summary judgment "should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). In considering a motion for summary judgment, "the judge's function is not . . . to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). A dispute about a material fact is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. at 248.

The Court must "view the evidence in the light most favorable to . . . the nonmovant, and draw all reasonable inferences in her favor," Dennis v. Columbia Colleton Med. Ctr., Inc., 290 F.3d 639, 645 (4th Cir. 2002), but the Court also "must abide by the affirmative obligation of the trial judge to prevent factually unsupported claims and defenses from proceeding to trial," Bouchat v. Baltimore Ravens Football Club, Inc., 346 F.3d 514, 526 (4th Cir. 2003).

2. The Need for Additional Discovery

In their Opposition, Ingram and Ingram PLLC argue that DPLH's motion should be denied because more time is needed for discovery.[4]Rule 56(f) permits a court to deny summary judgment or order a continuance if the nonmovant shows through affidavits that he may not properly oppose a motion for summary judgment. Fed. R. Civ. P. 56(f); Evans v. Techs. Apps. & Serv. Co., 80 F.3d 954, 961 (4th Cir. 1996). The Fourth Circuit "place[s] great weight on the Rule 56(f) affidavit." Evans, 80 F.3d at 961. "A party may not simply assert in its brief that discovery was necessary and thereby overturn summary judgment when [he] failed to comply with the requirement of Rule 56(f) to set out reasons for the need for discovery in an affidavit." Id.

Ingram and Ingram PLLC have not sought a continuance for further discovery or filed a Rule 56 (f) affidavit. Although their opposition to DPLH's motion for summary judgment refers to a lack of discovery, this reference is an insufficient basis for denial of DPLH's motion.

3. Count 1: Breach of Escrow Agreement

a. Liability of Ingram and Ingram PLLC

It is undisputed that (1) the escrow agreement was sent to Ingram at "Ingram & Associates, LLC," (2) Ingram signed it on behalf of "Ingram & Associates, LLC," and (3) faxed it to DPLH's counsel with an "Ingram & Associates, LLC" facsimile transmittal sheet. DPLH argues that Ingram is personally bound by the agreement and Ingram & Associates and Ingram PLLC are bound by Ingram, their agent.

Not all the defendants are bound by the agreement. If, as DPLH argues, Ingram acted on behalf of Ingram & Associates, then only Ingram & Associates is bound by the contract.[5] See, e.g., Hill v. Country Concrete, 108 Md. App. 527, 532, 672 A.2d 667, 670 (Md. Ct. Spec. Apps. 1995).

To determine whether Ingram intended to be personally bound by the agreement, the Court first examines the face of the agreement. See Morrison v. Baechtold, 93 Md. 319, 48 A. 926 (1901). Only if the agreement is ambiguous may extrinsic evidence be considered to determine the intentions of a party to be bound. Id.

The agreement is unambiguous. The agreement (1) is addressed to "Dr. Jesse H. Ingram, Ingram & Associates, LLC," (2) bears the office address of Ingram & Associates, and (3) has only one signature block, which indicates that the agreement was signed by "Jesse H. Ingram, Attorney" on behalf of "Ingram & Associates, LLC." Nothing in the agreement indicates that Ingram meant to assume personal responsibility for the agreement. Nor is there any mention of Ingram PLLC. Only Ingram & Associates was bound by the agreement. Accordingly, DPLH's motion for partial summary judgment on Count One must be denied as to Ingram and Ingram PLLC.

b. Ingram & Associates

i. Relationship to Ingram

Ingram & Associates argues that it is not liable under the agreement because Ingram was not acting as its agent in the transaction and did not have the authority to sign the contract on its behalf. DPLH contends that, as Of Counsel, Ingram was the agent of Ingram & Associates. DPLH also argues that if Ingram had no actual authority to act for Ingram & Associates, Ingram & Associates is liable under the doctrines of "apparent authority" and "agency by estoppel."

Agency is "the fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act." Green v. H & R Block, 355 Md. 488, 503 735 A.2d 1039, 1047 (1999). "A person may be deemed an agent based on actual authority or apparent authority." Jackson v. 2109 Brandywine, LLC, 180 Md. App. 535, 565, 952 A.2d 304, 321 (Md. Ct. Spec. Apps. 2008). "Actual authority exists only when the principal knowingly permits the agent to exercise the authority or holds out the agent as possessing it." Id.

"Under the equitable doctrine of apparent authority, a principal will be bound by the acts of a person purporting to act for him when the words or conduct of the principal cause the third party to believe that the principal consents to or has authorized the conduct of the agent." Id. "Like apparent authority, an agency by estoppel can arise only whe[n] the principal, through words or conduct, represents that the agent has authority to act and the third party reasonably relies on those representations." Johns Hopkins Univ. v. Ritter, 114 Md. App. 77, 689 A.2d 91 (Md. Ct. Spec. App. 1996).[6] The plaintiff has the burden of proving the nature and extent of the principal-agent relationship. Green v. H & R Block, 355 Md. 488, 503 735 A.2d 1039, 1047 (1999).

The only evidence that DPLH has provided about Ingram's relationship to Ingram & Associates is that he was "Of Counsel" to the firm. Given the variety of relationships between a lawyer and a firm that this term may signify,[7] and that Ingram & Associates denies that Ingram had actual authority to act on its behalf,[8] DPLH has not shown that there is a genuine issue of material fact about Ingram's actual authority to act for Ingram & Associates.

DPLH also argues that Ingram acted with apparent authority and Ingram & Associates is estopped from denying his agency. It is undisputed that (1) Ingram & Associates listed Ingram as an attorney on its website and its MySpace page and (2) Ingram used the mailing address, fax number, and office stationary (e.g., the facsimile transmittal sheet) of Ingram & Associates in the transaction with DPLH. Further, it is apparent that DPLH relied on Ingram & Associates' representations that Ingram was its agent: DPLH addressed the agreement to "Jesse H. Ingram, Ingram & Associates" and sent the agreement to Ingram & Associates via fax. That the agreement was signed on behalf of Ingram & Associates and sent under cover of Ingram & Associates' facsimile transmittal sheet suggest that DPLH's reliance was reasonable.

Ingram and Ingram & Associates have submitted affidavits that state in general terms that DPLH was aware that Ingram was not acting as an agent in the transaction. A self-serving affidavit consisting of "conclusory" statements without objective corroboration is insufficient to defeat summary judgment. See Evans v. Techs. Apps. & Serv. Co., 80 F.3d 954, 962 (4th Cir. 1996).[9] On these facts, a reasonable jury would have to find that Ingram was acting as the apparent agent of Ingram & Associates.

ii. Enforceability of the Agreement

Under the agreement, the defendants were "instructed to hold the $250,000.00 in escrow barring further written direction from [DPLH's counsel]." Pl.'s Mot. Summ. J., Ex. 2. The language is clear: the funds were not to be withdrawn without DPLH's permission.[10] Further, the defendants promised "to hold the $250,000.00 in escrow." Id. (emphasis added).[11] The agreement specified "the condition" that was required before the funds could be released to Jones, i.e., "direction from [DPLH's counsel]." The parties had an agreement that the $250,000.00 deposit would be held in escrow pending further instruction from DPLH.

The defendants contend that the escrow agreement is not enforceable because it was not supported by consideration. "To be binding and enforceable, contracts ordinarily require consideration." See Cheek v. United Healthcare of Mid-Atl., Inc., 378 Md. 139, 148, 835 A.2d 656, 661 (2003). "[C]onsideration may be established by showing a benefit to the promisor or a detriment to the promisee." Id. DPLH has not produced evidence that it provided consideration in exchange for the promise to hold DPLH's funds in escrow pending further instruction from its attorneys.

However, DPLH may be entitled to recover on the alternative contract theory of "detrimental reliance." Detrimental reliance requires (1) a clear and definite promise; (2) a reasonable expectation by the promisor that the promise will induce action or forbearance on the part of the promisee; (3) reasonable action or forbearance by the promisee; and (4) a detriment to the promisee that can be avoided only by the enforcement of the promise. Pavel Enters. v. A.S. Johnson Co., 342 Md. 143, 166, 674 A.2d 521, 533 (citing Restatement (Second) of Contracts § 90(1)).

By signing the April 30, 2009 agreement, Ingram bound Ingram & Associates to its terms, i.e., that the $250,000 would be held in escrow pending further instruction from DPLH's counsel. The defendants should have expected that returning the signed agreement would induce DPLH to wire the deposit to the accounts listed in the agreement. Relying on the promise to hold the funds, DPLH wired them into the escrow account. The reliance was reasonable; the terms of the agreement were clear, and Ingram, acting with apparent authority for Ingram & Associates, indicated that it would abide by those terms. As a result of this reliance, DPLH incurred a detriment—the loss of the money—when the funds were disbursed to Jones without informing DPLH. Only by enforcing the promise and requiring the return of DPLH's deposit can the detriment to DPLH be rectified.

Ingram & Associates has not produced evidence that would permit a jury to find for it on Count One. Accordingly, DPLH's motion for partial summary judgment on this count will be granted as to Ingram & Associates.

4. Count Two: Breach of Fiduciary Duty

DPLH contends that its April 30, 2009 agreement created a fiduciary relationship with the defendants, and by disbursing DPLH's deposit without authorization, the defendants breached their fiduciary duty. "Maryland does not recognize a separate tort action for breach of fiduciary duty." Int'l Bhd. Of Teamsters v. Willis Coroon Corp., 369 Md. 724, 728, 802 A.2d 1050, 1052 n. 1 (2002) (citing Kann v. Kann, 344 Md. 689, 713, 690 A.2d 509, 520-21 (1997)). Although the alleged "breach . . . may give rise to one or more causes of action, in tort or contract," breach of fiduciary duty is not an independent ground for relief. Id. Accordingly, DPLH's motion for partial summary judgment on Count Two must be denied.

5. Counts Three: Misuse of Trust Money

DPLH argues that Ingram is liable under Md. Code Ann., Bus. Occ. & Prof. § 10-306.[12] Under § 10-306, "a lawyer may not use trust money for any purpose other than the purpose for which the trust money is entrusted to the lawyer." Md. Code Ann., Bus. Occ. & Prof. § 10-306. Although an attorney's violation of § 10-306 may give rise to disciplinary proceedings, see id. § 10-307, or criminal liability, see id. § 10-606, no case is found in which a private right of action under the statute has been recognized. Accordingly, DPLH's motion for partial summary judgment on Count Three must be denied.

6. Count Four: Negligence and Gross Negligence

a. Ingram and Ingram PLLC

If Ingram acted as the apparent agent of Ingram & Associates, he may have personal tort liability. See Consumer Prot. Agency v. Morgan, 387 Md. 125, 175, 874 A.2d 919, 948 (2005) "[A]gents are personally liable for those torts which they personally commit, or which they inspire or participate in, even though performed in the name of an artificial body." Id.[13]

The statutory prohibition against the misuse of trust money by lawyers, Md. Code Ann., Bus. Occ. & Prof. § 10-306, is relevant to DPLH's negligence claim. A typical negligence action requires: (1) a duty owed by the defendant to protect the plaintiff from injury, (2) a breach of that duty, and (3) injury to the plaintiff that (4) proximately resulted from the defendant's breach of duty. Brown v. Dermer, 357 Md. 344, 356, 744 A.2d 47, 54 (2000), overruled in part on other grounds by Brooks v. Lewin Realty III, Inc., 378 Md. 70, 835 A.2d 616 (2003).

"[W]he[n] there is an applicable statutory scheme designed to protect a class of persons which includes the plaintiff . . . the defendant's duty ordinarily is prescribed by the statute . .. and the violation of the statute . . . is evidence of negligence."[14] Brooks v. Lewin Realty III, Inc., 378 Md. 70, 78, 835 A.2d 616, 620 (2003). "Under this principle . . . all that a plaintiff must show is: (a) the violation of a statute . . . designed to protect a specific class of persons which includes the plaintiff, and (b) that the violation proximately caused the injury complained of." Id. at 621. "Proximate cause is established by determining whether the plaintiff is within the class of persons sought to be protected, and the harm suffered is of a kind which the drafters intended the statute to prevent." Id. Such proof does not require a finding of negligence; the fact finder may still conclude that the defendant's conduct was reasonable under the circumstances, thus precluding liability. See id.

DPLH argues that Ingram violated § 10-306. As noted above, under § 10-306, "a lawyer may not use trust money for any purpose other than the purpose for which the trust money is entrusted to the lawyer." Md. Code Ann., Bus. Occ. & Prof. § 10-306. Trust money" is "a deposit, payment, or other money that a person entrusts to a lawyer to hold for the benefit of a client or a beneficial owner." Id. § 10-301. A "beneficial owner" is a "person, other than the client of a lawyer, for whose benefit a lawyer is entrusted to hold trust money." Id.

DPLH is within the class of persons the statute is meant to protect: persons who entrust their funds to attorneys for safekeeping.[15] The undisputed evidence is that (1) Ingram is a lawyer; (2) DPLH entrusted the funds to Ingram so that they could be held in escrow; (3) Ingram was to hold the funds either for the benefit of DPLH or of his client, Jones; and (4) Ingram released the money to Jones in violation of his promise to hold it in escrow, and thus for a purpose other than that for which it was entrusted to him.

The undisputed evidence is that Ingram's mishandling of the funds proximately caused DPLH's loss; had he abided by the agreement to await instruction before disbursing to Jones, DPLH would have been able to recover the money on demand. Given this unrebutted evidence, no reasonable jury could find that Ingram exercised reasonable care under the circumstances.[16] Indeed, even Ingram has stated that the funds were distributed (albeit unintentionally) in violation of the agreement, and promised DPLH that if Jones failed to return the funds, Ingram would "satisfy the obligation [himself]." Pl.'s Mot. Summ. J., Ex. 8 (email from Jesse H. Ingram, Esq. to Gary Adler, Esq., counsel for DPLH, September 18, 2009). DPLH is entitled to partial summary judgment on its negligence claim against Ingram.

DPLH has not provided evidence that Ingram was grossly negligent. Gross negligence is "an intentional failure to perform a manifest duty in reckless disregard of the consequences as affecting life or property of another, and also implies a thoughtless disregard of the consequences without the exertion of any effort to avoid them." Barbre v. Pope, 402 Md. 157, 187, 935 A.2d 699, 717 (2007). "Stated conversely, a wrongdoer is guilty of gross negligence or acts wantonly and willfully only if he inflicts injury intentionally or is so utterly indifferent to the rights of other that he acts as if such rights did not exist." Id.

DPLH has not alleged or presented evidence that Ingram intentionally or recklessly disbursed the escrowed funds in violation of the agreement. The emails from Ingram to DPLH's counsel suggest that he misunderstood the nature of the agreement, which he honestly (if unreasonably) believed permitted him to disburse the funds to Jones at Jones's request. Although these actions establish negligence, they do not establish gross negligence.

Accordingly, the motion for partial summary judgment on Court Four against Ingram will be granted on DPLH's negligence claim but denied on its gross negligence claim.

b. Ingram & Associates

The doctrine of agency by estoppel applies to tort claims. See Debbas v. Nelson, 389 Md. 364, 385, 885 A.2d 802, 815 (2005). "One who represents that another is his . . . agent and thereby causes a third person justifiably to rely upon the care or skill of such apparent agent is subject to liability to the third person for harm caused by the lack of care or skill of the one appearing to be a[n] . . . agent as if he were such." Id. As discussed above, Ingram & Associates has not opposed DPLH's evidence of apparent authority with evidence that would permit a reasonable jury to find that Ingram did not act as its apparent agent. Ingram & Associates is thus liable for the harm Ingram caused DPLH. Accordingly, DPLH's motion for partial summary judgment on Count Four will be granted as to Ingram & Associates.

B. Ingram and Ingram PLLC's Motion to Implead Jones Under Rule 14(a), a defendant, as a third-party plaintiff, may bring suit against another party for all or part of the plaintiff's claim against the third-party plaintiff." Fed. R. Civ. P. 14(a). If the third-party plaintiff files the third-party complaint more than 14 days after serving the original answer, leave of court must be obtained. Id. The decision whether to grant leave is committed to the sound discretion of the Court. DTM Research, LLC v. AT&T Corp., 179 F.R.D. 161, 162 (D. Md. 1998). In exercising this discretion, the Court balances the interest in promoting efficiency by trying related claims together against the danger of delay or complication in the underlying case. See id.

Ingram and Ingram PLLC's answers were served on DPLH on September 29, 2009. Paper Nos. 8, 9. Their motion to implead was filed on November 16, 2009. Paper No. 20. Thus, they require leave of Court to implead Jones. Disposing of Ingram and Ingram PLLC's claims against Jones would promote efficiency by resolving, in one case, the liability for the loss of DPLH's deposit. Given that this decision resolves only DPLH's motion for summary judgment on liability, the case will proceed. Any additional delay that will come from impleading Jones will likely be insubstantial, and would be outweighed by the economy that would be gained. Accordingly, Ingram and Ingram PLLC's motion to implead will be granted.

III. Conclusion

For the reasons stated above, DPLH's motion for partial summary judgment will be granted in part and denied in part, and Ingram and Ingram PLLC's motion to implead will be granted.

(MAJORITY OPINION)