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In re Farnham v. Rehwald4/5/2005
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.
In this legal malpractice action the trial court sustained without leave to amend demurrers to certain of Donald W. Farnham's claims against his former attorneys and ultimately entered a judgment of non-suit as to his remaining claims. On appeal Farnham contends those dispositive rulings, as well as certain evidentiary rulings at trial, were erroneous. We reverse the judgment because the trial court abused its discretion when it sustained demurrers to Farnham's claims for fraud and breach of fiduciary duty without leave to amend. In all other respects, we affirm the trial court's orders.
FACTUAL AND PROCEDURAL BACKGROUND
1. Farnham's Employment With Sequoia
Farnham was the chief executive officer and chairman of the board of Sequoia Holdings and Sequoia Creative, Inc. (collectively Sequoia) until he was accused of stock fraud by members of his boards of directors. A letter sent by those directors, addressed "Dear Sequoia Stockholder" and referring to "the exercise of questionable stock option by company president and board chairman Mr. Donald Farnham," caused a major transaction spearheaded by Farnham to collapse. A memorandum written by one of the directors, which was also distributed to various shareholders, vendors and clients, "strongly" recommended Farnham's termination because he had "placed the entire board in a compromising position." Shortly after the publication of these materials Farnham concluded he had been constructively discharged; he resigned from Sequoia in December 1993.
2. Rehwald's Representation of Farnham
In March 1994 Farnham engaged William Rehwald and his law firm Rehwald Rameson Lewis & Glasner (collectively Rehwald) to represent Farnham in an action for wrongful termination and defamation against Sequoia and certain of its officers, directors and affiliated entities. The parties signed a contingency fee agreement providing Rehwald was to receive one-third of all amounts obtained by settlement, arbitration award or judgment.
In April 1994 Rehwald filed the underlying action, Donald W. Farnham v. Sequoia Holdings, Inc. et al., Los Angeles Superior Court case number BC103544. Named as defendants were Sequoia Holdings, Inc., Sequoia Creative, Inc., Edward R. Whitehurst, Q. David Schweninger, Frank C. Romanski, William P. McCrory, Joseph H. Brown and Amelia A. Gordon. The complaint alleged Whitehurst, Schweninger, Romanski, Brown and Gordon were directors and officers of Sequoia Holdings and Sequoia Creative and shareholders of Sequoia Holdings; McCrory was a shareholder in Sequoia Holdings and Schweninger was the president, chief executive officer, director and chairman of the boards of Sequoia Holdings and Sequoia Creative.
The complaint alleged causes of action for breach of written contract, wrongful termination (constructive discharge in violation of public policy), wrongful denial of a contract, interference with contractual relations, defamation, intentional and negligent infliction of emotional distress and breach of corporate fiduciary duties and requested an accounting. An amendment to the complaint, filed in October 1994, alleged some $11.4 million in damages plus "annual bonuses, profit sharing, increased stock value, etc.," which were described as "value unknown."
Schweninger filed a cross-complaint for defamati
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