John W Ambrecht vs Marc A DePaco et al

Case Number

24CV00773

Case Type

Hearing Date / Time

Fri, 09/05/2025 - 10:00

Nature of Proceedings

Demurrer and Motion to Strike

Tentative Ruling

(1) For all reasons discussed herein, the demurrer of cross-defendants John W. Ambrecht, Leticia Martinez, and Ambrecht & Martinez, LLP, to the first amended cross complaint of cross-complainants DT Law Partners, LLP, Mark DePaco, and Renee C. DePaco, is sustained, in part as to the second through sixth causes of action only, with leave to amend. Except as herein sustained, the demurrer is overruled.

(2) For all reasons discussed herein, the motion of cross-defendants to strike portions of cross-complainants’ first amended cross-complaint is granted, in part and with leave to amend. The following matters are stricken from the first amended cross-complaint: (a) paragraph 40 [beginning with “Following the Partnership Amendment” and ending with “are Hispanic and or of Latin descent[]”]; (b) paragraph 41 [beginning with “The Outrageous Conduct” and ending with “to AMBRECHT and his practice[]”]; and (c) paragraph 3 of the prayer for judgment appearing on page 16 [“For exemplary and punitive damages against both Cross-Defendants in an amount to be determined[]”]. Except as herein granted, the motion to strike is denied.

(3) Cross-complainants shall file and serve a second amended cross-complaint, if any, on or before September 15, 2025.

Background:

On February 13, 2024, plaintiff John W. Ambrecht (Ambrecht) filed an original complaint against defendants Mark A. DePaco (DePaco) and DT Law Partners, LLP, (DT Law), alleging four causes of action: (1) breach of contract; (2) conversion; (3) breach of fiduciary duty; and (4) for an accounting.

On April 15, 2024, without any response to the original complaint having been filed, Ambrecht filed a first amended complaint (the FAC) against DePaco and DT Law alleging the same four causes of action described above, and adding a fifth cause of action for elder abuse. As alleged in the operative FAC:

Ambrecht is an 80-year-old attorney whose practice deals primarily with estate planning. (FAC, ¶ 8.) In June 2021, Ambrecht joined DT Law pursuant to an agreement under which Ambrecht would keep his book of business and receive 100 percent of collected billables less agreed upon overhead costs. (Id. at ¶ 9.) Under that agreement, neither DePaco nor DT Law would make any profit from Ambrecht’s clients during the time Ambrecht continued to work, and Ambrecht would receive 20 percent of the fees collected for any matter Ambrecht brought in. (Id. at ¶¶ 10 & 12.) In 2022 and 2023, DePaco and DT Law collected money from Ambrecht’s clients but did not remit amounts owed to Ambrecht. (Id. at ¶ 13.)

On June 7, 2024, DePaco and DT Law filed an answer to the FAC, generally denying its allegations and asserting twenty-three affirmative defenses. On the same date, DePaco, DT Law, and Renee C. DePaco (Renee) filed a cross-complaint against Ambrecht, Leticia Martinez (Martinez), and Ambrecht & Martinez, LLP (AML), alleging eight causes of action: (1) breach of contract {against Ambrecht only); (2) fraud and deceit (against Ambrecht, Martinez, and AML); (3) negligent misrepresentation (against Ambrecht, Martinez, and AML); (4) conversion (against Ambrecht only); (5) intentional interference with contractual relationships (against Ambrecht, Martinez, and AML); (6) breach of the implied covenant of good faith and fair dealing (against Ambrecht, Martinez, and AML); (7) breach of fiduciary duty (against Ambrecht only); and (8) intentional infliction of emotional distress (against Ambrecht only). (Note: The court will refer to parties by their first names to avoid confusion due to common surnames.)

On July 25, 2024, without any response to their cross-complaint having been filed, DePaco, DT Law, and Renee filed a first amended cross complaint (the FACC) alleging six causes of action: (1) breach of contract (against Ambrecht only); (2) conversion (against Ambrecht only); (3) breach of fiduciary duty (against Ambrecht only); (4) intentional infliction of emotional distress (against Ambrecht only); (5) fraud (against Martinez only); and (6) conversion (against Ambrecht and AML). As alleged in the operative FACC:

DePaco and David Tappeiner (Tappeiner) formed DT Law pursuant to a “Partnership Agreement” dated June 29, 2020. (FACC, ¶ 9.) Under the terms of the Partnership Agreement, DePaco was DT Law’s Managing Partner, and, until August 2022, DePaco included Tappeiner in all material decisions. (FACC, ¶ 11.) DT Law directly hired Martinez as a senior associate in December 2021. (FACC, ¶ 12.)

In November 2020, Ambrecht approached DT Law in regard to a potential working relationship between AML and DT Law. (FACC, ¶ 13.) In December 2020, Ambrecht and DT Law discussed an arrangement (the Arrangement) whereby DT Law would procure and make available to Ambrecht an adjoining suite (Suite J), in exchange for which Ambrecht would reimburse DT Law for the cost of Suite J, collect client fee revenue, pay operating costs, and transition Ambrecht’s book of business to DT Law once Ambrecht wound down his practice. (FACC, ¶ 15.) On July 1, 2021, Ambrecht relocated his practice to Suite J pursuant to the Arrangement. (FACC, ¶ 17.)

The parties agreed to a “First Modification” of the Arrangement in July 2021, pursuant to which DT Law assumed, in exchange for an administrative fee, many of Ambrecht’s direct operational costs and streamlined Ambrecht’s billing and collections to permit Ambrecht to wind down AML. (FACC, ¶¶ 19 & 21.) Pursuant to the First Modification, Ambrecht demanded that DT Law become the direct employer of Ambrecht’s team and assume employment liabilities and risks. (FACC, ¶ 20.) By August 2021, DT Law was the direct employer of Ambrecht’s team. (Ibid.)

Ambrecht never paid the administrative fee described above to DT Law. (FACC, ¶ 21.) In addition, DT Law discovered that Ambrecht had directed his employees to transfer certain payment obligations to DT Law without DT Law’s approval or knowledge. (FACC, ¶ 22.) DT Law also expended significant resources to assist Ambrecht with the management of his practice without charging Ambrecht a fee for these services. (FACC, ¶ 23.) The Arrangement and First Modification also did not require Ambrecht to generate minimum billable hours or revenue based on Ambrecht covering his own expenses, retiring, and transitioning his book of business to DT Law. (FACC, ¶ 24.)

In August 2021, Ambrecht pushed for a “Second Modification” of the Arrangement to require that payroll to Ambrecht be made through DT Law. (FACC, ¶ 25.) The Second Modification necessitated and was documented in a written amendment to the Partnership Agreement (the Partnership Amendment) executed on August 1, 2021, and pursuant to which, among other things, Ambrecht was admitted into the partnership as an income only, non-equity partner, and Ambrecht’s current and former clients were transferred to DT Law. (FACC, ¶¶ 25-26.)

As a non-equity partner, Ambrecht received guaranteed monthly payments without regard to billable hours or collections, and certain discretionary compensation reflecting that DT Law was directly liable for all operational and management costs and expenses, leaving Ambrecht free to wind down the operations of AML. (FACC, ¶¶ 28-31.) Following the Second Modification, Ambrecht was not liable for any business loss of, or entitled to any profit generated by, DT Law apart from the discretionary compensation described above. (FACC, ¶ 33.)

After the Partnership Amendment, Ambrecht demanded that DT Law provide services to clients with whom DT Law had no fee or representation agreements, failed to assist any clients of DT Law, focused only on his own client income, and refused to bring in any new clients to DT Law. (FACC, ¶¶ 34-39.) Ambrecht also asserted politically conservative right-wing views and conspiracy theories which caused fright, grief, shame, humiliation, embarrassment, anger, worry, and anxiety to DT Law’s staff. (FACC, ¶¶ 40-41.)

After Tappeiner left DT Law, Ambrecht claimed that he was entitled to 100 percent of the income from Ambrecht’s clients, misrepresented the content of Ambrecht and Tappeiner’s communications as to whether Ambrecht was entitled to a share of the general profits of DT Law, defrauded DT Law into making discretionary 2023 year-end bonus payments for personnel who had already planned their departure, refused to review or approve client pre-bills from October 2023 through December 2023, continued to receive guaranteed monthly payments, threatened DT Law with regard to the collection of certain accounts receivable, informed clients not to pay DT Law because they belonged to AML, failed to satisfy insurance obligations, saddled DT Law with costs that DT Law would not have assumed without Ambrecht’s book of business, and departed from DT Law with Beverly Robison (Robison) and Martinez to commence the full time operation of AML. (FACC, ¶ 46.)

On May 12, 2025, Ambrecht, Martinez, and AML (collectively, Cross-Defendants) filed a demurrer to each cause of action alleged in the FACC which is made on the grounds that the FACC fails to state facts sufficient to constitute a cause of action, and separately filed a motion to strike claims for punitive or exemplary damages alleged in the FACC.

DePaco, DT Law, and Renee (collectively, Cross-Complainants) oppose the demurrer and motion to strike.

Analysis:

(1) Demurrer to the FACC

“A person against whom a ... cross-complaint has been filed may, within 30 days after service of the ... cross-complaint, demur to the ... cross-complaint.” (Code Civ. Proc., § 430.40.)

Court records reflect that AML and Martinez were ostensibly served with copies of the FACC and summons on, respectively, August 11 and 13, 2024. (See Aug. 16, 2024, Proofs of Service.) Court records further reflect that on August 26, 2024, Cross-Defendants filed a declaration of their counsel claiming an entitlement to 30-day extension of time in which to file a response to the FACC. (See Aug. 26, 2024, Decl. of R. Chris Kroes.) For these reasons, it appears that the demurrer was not filed within 30 days after service of the FACC on Cross-Defendants as required by Code of Civil Procedure section 430.40, and is untimely.

In their opposition to the demurrer, Cross-Complainants do not raise the issue of the timeliness of the demurrer, and offer no reasoned argument showing why any delay in filing the demurrer affected any rights of, or prejudiced, Cross-Complainants. Instead, Cross-Complainants oppose the demurrer on substantive grounds. For these reasons, the court will exercise its discretion to consider the demurrer notwithstanding whether it was timely filed. (Jackson v. Doe (2011) 192 Cal.App.4th 742, 750 [general discussion of court’s discretion to consider untimely demurrer].)

“In reviewing the sufficiency of a complaint against a general demurrer, we are guided by long-settled rules. ‘We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.] We also consider matters which may be judicially noticed.’ [Citation.] Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context.” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)

 “If the complaint states a cause of action under any theory, regardless of the title under which the factual basis for relief is stated, that aspect of the complaint is good against a demurrer.” (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 38.)

Demurrer to the second, third, fourth, and sixth causes of action:

Cross-Complainants include in their opposition to the demurrer, a “Preliminary Statement” setting forth what Cross-Complainants describe as “recent developments ... that impact[] the demurrer to the [FACC]” and which include an agreement by Cross-Complainants to dismiss the second, third, fourth, and sixth causes of action alleged in the FACC. (Opp. at p. 1, l. 26-p. 2, l. 9.) Cross-Complainants further state that they “intend to proceed under their first cause of action for breach of contract against [Ambrecht] and their fifth cause of action against ... Martinez and in light of the above will address the demurrer as to those two causes of action only.” (Opp. at p. 2, ll. 10-12.)

Considering the information appearing in the opposition of Cross-Complainants to the demurrer and described above, and that Cross-Complainants advance in their opposition no reasoned legal or factual argument to dispute the points raised in the demurrer as to the second, third, fourth, and sixth causes of action alleged in the FACC, the court understands Cross-Complainants’ “Preliminary Statement” as a concession that the demurrer as to the second, third, fourth, and sixth causes of action has some merit. For these and all further reasons discussed above, the court will sustain the demurrer as to these causes of action. As the FACC is effectively an original pleading, the court will grant Cross-Complainants leave to amend. (Eghtesad v. State Farm General Insurance Company (2020) 51 Cal.App.5th 406, 411-412.)

Demurrer to the first cause of action:

As grounds for the demurrer to the first cause of action for breach of contract alleged in the FACC, Cross-Defendants assert that Cross-Complainants have failed to attach a copy of any contract allegedly breached by Ambrecht, or to plead verbatim the terms of that contract. Cross-Defendants further assert that the allegations of the FACC fail to show or indicate whether the contract which is the subject of the first cause of action is written or oral. For these reasons, Cross-Defendants argue, the FACC fails to state facts sufficient to constitute a cause of action for breach of contract against Ambrecht.

“A cause of action for breach of contract requires pleading of a contract, plaintiff’s performance or excuse for failure to perform, defendant’s breach and damage to plaintiff resulting therefrom. [Citation.] A written contract may be pleaded either by its terms—set out verbatim in the complaint or a copy of the contract attached to the complaint and incorporated therein by reference—or by its legal effect. [Citation.]” (McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1489.)

The FACC alleges that, pursuant to the Partnership Amendment, DT Law and Ambrecht agreed that DT Law would “acquire the Book of Business upon [Ambrecht’s] retirement...”; that Ambrecht breached his obligations under the Partnership Amendment by, among other things, failing to review and approve pre-bills, failing to collect DT Law accounts receivable, and failing to pay administrative fees; and that DT Law performed “all conditions required of it under the. terms of the Arrangement as modified by the Partnership Amendment...” (FACC, ¶¶ 48-50.) The FACC further alleges that, as a result of Ambrecht’s breach of the Arrangement as modified by the Partnership Amendment, DT Law incurred and paid certain expenses as further described above. (FACC, ¶ 51.)

Giving the allegations of the FACC a reasonable interpretation, and accepting the allegations as true, the FACC is sufficient to show, for present purposes, that the contract at issue in the first cause of action consists of the Arrangement as modified by the Second Modification, which was documented in the written Partnership Agreement. These express allegations are sufficient to show or indicate that the Arrangement is ostensibly oral, and that the Second Modification as reflected in the Partnership Amendment, and the Partnership Amendment, is written. For these reasons, the FACC is sufficient to show whether the contract at issue is oral or written.

The allegations described above are also sufficient to set forth what Cross-Complainants assert are the essential or material terms of the Arrangement, the Second Modification, and the Partnership Amendment notwithstanding whether Cross-Complainants can prove these allegations. (Miles v. Deutsche Bank Nat’l Trust Co. (2015) 236 Cal.App.4th 394, 401-402; Aragon-Haas v. Family Security Ins. Services, Inc. (1991) 231 Cal.App.3d 232, 239.)

The FACC also, for present purposes, sufficiently alleges Cross-Complainant’s performance under the purported oral and written agreements described above, the acts which constitute the alleged breach of these agreements by Ambrecht, and the damage incurred by Cross-Complainants as further described above. To the extent the allegations of the FACC are in some respects uncertain, these ambiguities may be clarified in discovery. (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616.)

For all reasons further discussed above, the FACC alleges facts which are sufficient to constitute a cause of action for breach of contract against Ambrecht. Therefore, the court will overrule the demurrer as to the first cause of action alleged in the FACC.

Demurrer to the fifth cause of action for fraud:

The fifth cause of action for fraud alleged in the FACC is directed to Martinez, only, and arises from a purportedly false representation made by Martinez to DePaco, that Martinez had no intention of joining Ambrecht which Martinez allegedly made for the purpose of inducing DePaco and DT Law to pay Martinez a $20,000 discretionary bonus. (FACC, ¶¶ 70-74.) Cross-Defendants contend that the FACC fails to allege specific facts showing how, when, where, or by what means Martinez inquired as to the discretionary bonus, Martinez advised DePaco that she did not intend to join Ambrecht, or DePaco advised Martinez that she would receive the bonus if she planned to stay. For these reasons, Cross-Complainants argue, the FACC fails to plead fraud with the required specificity.

“The elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.) “In California, fraud must be pled specifically; general and conclusory allegations do not suffice. [Citations.] … [¶] This particularity requirement necessitates pleading facts which ‘show how, when, where, to whom, and by what means the representations were tendered.’ [Citation.]” (Id. at p. 645, original italics, internal quotation marks omitted.)

The general and conclusory allegations described above fail to plead specific facts showing how, when, where, or by what means Martinez represented to or advised DePaco that she did not intend to join Ambrecht. For this reason, the court will sustain the demurrer to the fifth cause of action, with leave to amend.

(2) Motion to Strike

“Any party, within the time allowed to respond to a pleading may serve and file a notice of motion to strike the whole or any part thereof[.]” (Code Civ. Proc., § 435, subd. (b)(1).)

For the same reasons further discussed above, the motion to strike does not appear to have been filed and served within the time allowed to respond to the FACC. Notwithstanding whether the motion to strike is timely, Cross-Complainant’s opposition to that motion includes the same “Preliminary Statement” described above, in which Cross-Complainants assert that they intend to proceed with the first and fifth causes of action only, and to dismiss the second, third, fourth, and sixth causes of action alleged in the FACC. Cross-Complainants also oppose the motion to strike on substantive grounds, asserting that the fifth cause of action for fraud is adequately pleaded and sufficient to support an award of punitive damages.

The same reasoning and analysis apply. For all reasons discussed above, the court will exercise its discretion to consider the merits of motion of Cross-Defendants to strike the punitive damages claim alleged in the FACC.

Upon the filing of a motion to strike made under Code of Civil Procedure section 435, the court may “strike out any irrelevant, false, or improper matter inserted in any pleading” or “strike all or part of any pleading not filed in conformity with applicable law, court rules, or an order of the court.” (Code Civ. Proc., § 436(a)-(b).) Grounds for a motion to strike must appear on the face of the pleading or from matters which the court may take judicial notice. (Code Civ. Proc., § 437, subd. (a).)

As grounds for their motion, Cross-Defendants contend that Cross-Complainants have failed to plead facts sufficient to support a claim for or an award of punitive damages.

“In an action for the breach of an obligation not arising from contract, where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice, the plaintiff, in addition to the actual damages, may recover damages for the sake of example and by way of punishing the defendant.” (Civ. Code, § 3294, subd. (a).) “In order to survive a motion to strike an allegation of punitive damages, the ultimate facts showing an entitlement to such relief must be pled by a plaintiff.” (Clauson v. Superior Court (1998) 67 Cal.App.4th 1253, 1255.) The facts and circumstances constituting the claim for punitive damages must also be set forth “with sufficient particularity to apprise the opposite party of what he is called on to answer, and to enable the court to determine whether, on the facts pleaded, there is any foundation [for the claim].” (Lehto v. Underground Construction Company (1977) 69 Cal.App.3d 933, 944.)

Considering the allegations of the FACC described above, and that the court will sustain the demurrer to the second, third, fourth, and sixth causes of action, the present record shows, and Cross-Complainants do not appear to dispute, that the claim for punitive damages asserted in the FACC arises from the purportedly fraudulent misrepresentation that Martinez had no intention of joining Ambrecht, and not from any purported malice or oppression by Cross-Defendants. (See, e.g., Civ. Code, § 3294, subd. (c)(1)-(2) [defining “malice” and “oppression”]; College Hospital Inc. v. Superior Court (1994) 8 Cal.4th 704, 725 [general discussion of meaning of term “despicable”].)

The same reasoning and analysis apply. For all reasons discussed above, and as the court will also sustain the demurrer to the fifth cause of action on the grounds that the FACC fails to plead, with requisite specificity, facts sufficient to give rise to a cause of action for fraud, the court will also grant the motion to strike as to the claim for “exemplary and punitive damages against both Cross-Defendants...” as alleged Cross-Complainant’s prayer for judgment paragraph 3, which appears in page 16 of the FACC.

Cross-Defendants also request that the court strike paragraphs 40 and 41 of the FACC, in which Cross-Complainants allege facts purporting to show extreme and outrageous conduct by Ambrecht. (FACC at pp. 9-10.) Though the court will overrule the demurrer to the first cause of action for breach of contract alleged in the FACC, in which Cross-Complainants incorporate these allegations (see FACC, ¶ 47), they do not appear relevant to that cause of action. (Code Civ. Proc., § 436, subd. (a).) For this reason, the court will grant the motion to strike paragraphs 40 and 41 of the FACC. In doing so, the court expresses no opinion as to whether these allegations are or may be relevant to the claims alleged in the second, third, fourth, or sixth causes of action further described above.

In addition, Cross-Defendants request an order striking paragraphs 62 through 65 and 67, each of which are alleged in the fourth cause of action for intentional infliction of emotional distress. As the court will sustain the demurrer to that cause of action with leave to amend, the request to strike these paragraphs is moot.