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1 LAW OFFICE OF JOSEPH WM.

KLOBAS
Joseph Wm. Klobas, Esq. (SBN 91736) FfLED
2 16685 Mission Way Superior Court Of ^arifornia,
Sonoma, Califomia 95476-3010 Si»&rdmentQ
3 Tel: 707/933-1333 06/18/2010
Fax: 707/933-1334
4
LAW OFFICE OF EUGENE P. HAYDU By K\ Deputy
5 Eugene P. Haydu, Jr., Esq. (SBN 136174) Caeu Number:
6
965 University Avenue, Suite 222 34-201 !}'00S}80612
Sacramento, Califomia 95825-6736
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Tel: 916/437-1650
Fax: 916/437-1655
8
Attomeys for Plaintiffs
Department
9 Assignments
Case Managemeni 45
Law and Motion 53
10 Minors Compromise 24

11 IN THE SUPERIOR COURT OF CALIFORNIA

12 IN AND FOR THE COUNTY OF SACRAMENTO


13

14

15
RICHARD & TAMMY ARNO, GREG & CaseNo.:
16 CYNDEE PEART, JIM & MARILYN
McCURDY, LORI TAVIN, MIKE COMPLAINT FOR:
17 MULLALY, SAMUEL WILLIAMS III, JOE
«fe HELEN SOPHIA, ZANE & TANIA DAMAGES FOR LEGAL MALPRACTICE
18 ROESER, THULAN NGUYEN, LESLIE 8c (NEGLIGENCE); BREACH OF FIDUCIARY
DUTY; ACTUAL FRAUD (DECEIT)
ROB YOUNGSTROM, ROGER LOCKE, all
19 CONSTRUCTIVE FRAUD; BREACH OF
individuals, CONTRACT; EQUITABLE RELIEF FOR
20 UNJUST ENRICHMENT
Plaintiffs,
21

22
vs.
MILSTEIN, ADELMAN & KREGER, LLP,
23
and DOES 1-25, inclusive.
24
Defendants.
25

26

27 COME NOW PLAINTIFFS WHO COMPLAIN AGAINST DEFENDANT AS

28 FOLLOWS:

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Complaint
1 GENERAL ALLEGATIONS

2 I. Plaintiffs are all individuals residing in the County of Sacramento.

3 2 On information and belief, defendant law firm Milstein, Adeiman &. Kreger LLP

4 ("MILSTEIN") is a limited liability partnership with its principal place of business in Santa Monica,

5 Califomia. On further information and belief, at all times material hereto, Lee Jackson ("Jackson") was
6 an associate attomey, agent and employees of MILSTEIN. Jackson was assigned to handle Plaintiffs
7 case as set forth below In domg the things herein alleged Jackson was acting within the scope of such
8
agency and employment and MILSTEIN is thus vicanously liable for Jackson's conduct as set forth
9
herein i
10
3. Venue is proper in this court because MILSTEIN entered into contracts with Plaintiffs in
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the County of Sacramento, which contracts were to be, and were, performed in the County of Sacramento,
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breach ofsaid contracts occurred in the County ofSacramento, and the liability of MILSTEIN as set forth
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herein arose in the County of Sacramento.
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4. Plaintiffs are unaware ofthe true narnes and capacities ofthe persons sued herein as Does
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1 through 25, inclusive, or of their involvement herein, or of the facts that constitute causes of action
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against them, and on that basis have sued said defendants by fictitious names. Plaintiffs will pray foi
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leave to amend this complaint to identify fictitious defendants and add appropriate charging allegations,
18

19 or to add facts that constitute causes ofaction against known defendants, when the same are known.

20 5. Between in or about December 2006 and June 2007, Plamtiffs each entered into written

21 contingency fee agreements with MILSTEIN whereby MILSTEIN agreed to represent Plaintiffs in a

22 single civil action against U.S. Home Corporation, the developer-contractor of defectively constructed

23 homes owned by Plaintiffs, and numerous sub-contractor defendants to recover damages for construction

24 defects in Plaintiffs' homes. Each fee agreement between each Plaintiff and MILSTEIN provided thai
25 MILSTEIN would be paid a contingency fee of 33 1/3 percent ofali monies recovered in the litigation, oi
26 40 percent of any and all monies recovered in the event the matter proceeded to trial, arbitration oi
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mediation or resolved within 90 days of the date first set for trial, arbitration or mediation. The fee
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agreements also provided that MILSTEIN would advance all costs of litigation and that Plaintiffs would
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Complaint
not have to reimburse MILSTEIN for these costs in the event the case resolved in favor ofthe defendants

2 Implicit terms ofthe fee agreements and the contractual relationship between Plaintiffs and MILSTEIN

3 were, among others, that MILSTEIN, their respective partners, associate attomeys, agents, and

4 employees- (1) would exercise the knowledge, skill, and ability ordinarily possessed and exercised by

5 members ofthe legal profession in similar circumstances; (2) would discharge the duties of an attorney al

6 law to the best of their knowledge and ability; (3) would provide competent representation to Plaintiffs;
7 (4) would keep Plaintiffs fully informed about all significant developments related to the case; (5) would
8
disclose to Plaintiffs all facts, documents, and circumstances necessary to enable Plaintiffs to make
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informed and intelligent decisions regarding the case and, in particular, settlement ofthe case; (6) would
I
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provide Plaintiffs with the amounts, terms and conditions of any written offer of settlement made by U S
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Home Corporation or any other defendants in the case; (7) would provide Plaintiffs with a copy of any
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proposed settlement agreement and explain its terms and conditions to them before seeking their consent
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thereto, and (8) would not settle Plaintiffs' claims without the express, informed consent ofeach Plaintiff.
14
6 Pursuant to its contracts with Plaintiffs, on May 9, 2007 MILSTEIN filed a civil action
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16 against U.S. Home Corporation and numerous sub-contractor defendants on behalf of Plaintiffs and others

17 in the Superior Court ofCaiifomia, County of Sacramento, case number 07AS02133, entitled Garry &

18 Trish Tabor, et al. v. U.S. Home Corporation et al (hereafter "Underlying Action") in which MILSTEIN

19 included causes ofaction sounding in tort, contract, ahd warranty.

20 7. On information and belief, sometime after filing the Underlying Action, MILSTEIN

21 retained construction experts to inspect Plaintiffs' homes, to detail the defects in each home, and to

22 estimate the costs ofrepairing said defects Said expert produced and delivered to MILSTEIN reports on

23 each of Plaintiffs homes, as follows:


24 Home Estimated Cost of Repair
25 RICHARD & TAMMY ARNO $153,645.83
26 GREG & CYNDEE PEART $ 126,13 3 93
JIM & MARILYN McCURDY $ 13 3,03 6 00
27
LORI TAVIN $156 052.50
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MIKE MULLALY ' $138,215.76

Complaint
SAMUEL WILLIAMS III $166,019.99
JOE & HELEN SOPHIA ' $133,564.92
2
KEVIN & TANIA ROESER $152,488 12
3
THULAN NGUYEN $145,385.41
4 LESLIE & ROB YOUNGSTROM \ $131,710.38
5 ROGER LOCKE $160,814.75

6 I

7 8. A mandatory settlement conference ("MSC") was set in the Underlying Action foi

8 October 15, 2008. Jackson did not inform any Plaintiff of the upcoming MSC. About a week before the

9 scheduled MSC, on October 9, 2008 ("October 9 letter"), Jackson contacted each Plaintiff in writing and

10 informed them that progress was still being made toward an eventual settlement, informed them that not

11 all ofthe defendants had yet agreed to settlement temis, and gave Plaintiffs Jackson's "projection" of what
12 an eventual net settlement amount might be for each of Plaintiffs' homes if an eventual settlement could
13 be reached with all defendants. That "projection" was between $5,620.70 and $8,804.09 per home In
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that same written communication, Jackson asked Plaintiffs' to sign bank pages that he said were "pages to
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the settlement agreement" although Plaintilfs had never been provided a copy of any settlement
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agreement, nor had the terms and conditions of any proposed settlement agreement been communicated
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or explained to them All Plaintiffs except Thulan Nguyen signed the blank pages and retumed them to
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MILSTEIN with the belief and expectation that the pages singed in blank would not be used to settle theii
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claims without first having been provided by Jackson and/or MILSTEIN with all of the material
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information necessary to enable Plaintiffs to make an informed decision regarding settlement, after having
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had the opportunify to read and consider an actual proposed settlement agreement, and after having had
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the opportunify to discuss the terms of an actual proposed settlement agreement, and the advisabilify ol
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entering into such an agreement, with their attomeys.
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9. At no time prior to requesting Plaintiffs to sign blank pages, as set forth above, did
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Jackson inform Plaintiffs, in writing or otherwise, of: (1) the terms and conditions ofa settlement offer oi
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27 offers; (2) the amount ofany settlement offer by U.S Home Corporation and/or any other defendants; (3)

28 the net recovery to any Plaintiff under an actual proposed settlement offer; (4) how costs and

disbursements would affect the net amount payable to each Plaintiff under an actual proposed settlemeni
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Complaint
1 offer; or (5) the amount of attomey's fees that would be paid to MILSTEIN under an actual proposed

2 settlement agreement i

'3 10. After having received the blank pages, signed by all Plaintiffs except Thulan Nguyen,

4 and unbeknownst to Plaintiffs, and not having disclosed to Plaintiffs' their own expert's estimate of the

5 costs ofrepairing each of their homes, MILSTEIN settled all of Plaintiffs' claims at the October 15, 2008
6 MSC (hereafter "unauthorized settlement"). The amount of the unauthorized settlement varied but in
7 each case is estimated to be less than approximately 10 percent ofthe amount ofthe estimated cost of
8
repairs as detemiined by the expert retained by MILSTEIN.
9
11. After MILSTEIN agreed to the unauthorized settlement, Jackson contacted Plaintifi
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Thulan Nguyen and threatened that her case would be dismissed if she did not sign and return the blank
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pages, and told her "[i]t is our understanding from your lack of communications with our office that you
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have no interest in participating in this lawsuit." Jackson also informed Plaintiff that several of the
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defendants would seek to have her claim dismissed with prejudice, and told her that the court would
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dismiss her case if she did not sign and retum the blank pages. After having received these threats of
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dismissal, Thulan Nguyen signed and retumed the blank pages out of fear that her case would be
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dismissed. Jackson never called Plaintiffto discuss the matter with her.
17

18 12 It was some eight months after Jackson settled Plaintiffs' claims that Plaintiffs were

19 provided for the first time with the already fully-executed unauthorized settlement agreement. Piaintiffs

20 did not consent to the terms of this settlement agreement. About the same time, Piaintiffs saw, for the

21 first time, the expert's estimate of the costs to repair their homes, documents they received not from

22 MILSTEIN or Jackson but from independent sources.

23 13. Defendants continued to represent Plaintiffs Helen and Joe Sophia in the Underlying

24 Action until June 29, 2009. Defendants continued to represent Piaintiffs Rob and Leslie Youngstrom in
25 the Underlying Action until July 2, 2009. Defendants continued to represent all other Plaintiffs in the
26 Underlying Action until September 2009.
27
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Complaint
FIRST CAUSE OF ACTION

2 (LEGAL MALPRACTICE - NEGLIGENCE)

3 14 Plaintiffs incorporate herein by reference paragraphs 1-13 above as if each were fully set

4 forth herein.

5 15. An attomey-client relationship existed between Plaintiffs and Jackson.


6 16. By virtue of the attomey-client relationship between Plaintiffs and Jackson, Jackson
7 owed a dufy of care and skill to Plaintiffs.
8
17 An attomey exercising the knowledge, skill, and abilify ordinarily possessed and
9
exercised by members ofthe legal communify in similar circumstances would not have settled a client's
10
claims without first obtaining the client's informed consent to the terms and conditions of settlement; and
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would not have settled a client's claims without first providing the client with all material information
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necessary to make an infomned decision whether to settle the case. Jackson negligently failed to provide
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Plaintiffs with the information necessary for them to make an informed decision regarding settlement, and
14
settled Plaintiffs' claims without their informed consent by having them execute blank pages of paper that
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were later attached to "the settlement agreement", as set forth herein, to which Plaintiffs never consented
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18. Had Jackson not entered into the unauthorized settlement as set forth herein. Plaintiffs
17
would have proceeded to trial against the defendants in the Underlying Action.
18

19 19. As a direct and proximate result of MILSTEIN's and Jackson's unauthorized settlement of

20 their claims. Plaintiffs received grossly inadequate settlement proceeds and were deprived of the right tc

21 have their claims decided by ajury

22 20. Had Jackson not entered into the unauthorized settlement agreement, it is reasonably

23 foreseeable and likely that Piaintiffs would have prevailed in the Underlying Action and received a

24 judgment against U.S. Home Corporation and other defendants far in excess of the unauthorized

25 settlement amount, and in no event less than the approximate, collective total amount of $1,500,000 00;
26 or, that Plaintiffs would have received a fair and reasonable settlement far in excess of the amount they
27 received under the unauthorized settlement agreement, in an amount to be proved at trial.
28
WHEREFORE, Plaintiffs pray forjudgment against Defendant as set forth below.

Complaint
SECOND CAUSE OF ACTION

2 (Breach of Fiduciary Dufy)

3 21. Plaintiffs incorporate herein by reference paragraphs 1-16 above as if each were fully set

4 forth herein.

5 22. At all times relevant hereto, a fiduciary relationship existed between Plaintiffs and
6 Jackson. ,
7
23. Jackson's fiduciary dufy to Plaintiffs included, among others, the dufy to fully inform
8
Plaintiffs of all proposed terms of any binding or non-binding settlement offers, and to communicate to
9
Plaintiffs' all information and/or documents necessary for Plaintiffs to make an informed decision
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regarding settlement of their claims.
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24. For the reasons set forth herein, Jackson breached his fiduciary dufy to Plaintiffs by.
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among other things: (1) failing to provide Plaintiffs with all ofthe material information in Jackson's and
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MILSTEIN's possession regarding the costs to repair the defects in Plaintiffs' homes; (2) by seeking
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Plaintiffs' signatures on blank pieces of paper represented to be pages to "the settlement agreement"
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although their was in fact no settlement agreement at the time, (3) by thereafter attaching the pages signed
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in blank to a "settlement agreement" that had never been provided to Plaintiffs nor its terms and
17

18 conditions explained to them; and (4) by settling Plaintiffs' claims against U.S. Home Corporation and

19 the other sub-contractor defendants without first obtaining Plaintiffs' informed consent to a settlement;

20 and (5) by interfering with Plaintiffs' efforts after the fact to set aside the unauthorized settlement

21 agreement.

22 25. As a direct and proximate result of Jackson's breach of fiduciary dufy. Plaintiffs' claims

23 against U.S. Home Corporation and other sub-contractor defendants were settled without Plaintiffs

24 informed consent and for a grossly inadequate sum. As a further direct and proximate result of Jackson's
25 breach of fiduciary dufy. Plaintiffs were deprived ofthe opportunify to proceed to trial in the Underlying
26 Action and, had they been afforded that opportunify, it is reasonably foreseeable and likely that Plaintiffs
27
would have prevailed against defendants and received ajudgment far in excess ofthe settlement amount,
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and in no event less than the approximate, collective total amount of $1,500,000.00; or, that Plaintiffs
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Complaint
1 would have received a fair and reasonable settlement far in excess ofthe amount they received under the
I

2 unauthorized settlement agreement, in an amount to be proved at trial.


3 WHEREFORE, Plaintiffs pray forjudgment against Defendant as set forth below.
4 THIRD CAUSE OF ACTION
5 (Fraud - Deceit)
I
6 26 Plaintiffs incorporate herein by reference paragraphs 1-13, 15-17, and 22-25 above as if
7
each were fully set forth herein
I
8
27. Prior to the unauthorized settlement of Plaintiffs' claims, MILSTEIN had commissioned
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and received written reports from a construction expert detailing the defects allegedly caused by U.S
10

II Home Corporation and other defendants, and the cost of repairing said defects, in each of Piaintiffs

12 homes, as set forth more fully in Paragraph 7 above. At the time Jackson sought Plaintiffs' signatures on

13 blank pages and advised them of progress toward settlement of their claims, as set forth herein, Jackson

14 actively concealed the estimated costs of repairs frorh Plaintiffs, knowing that that information was highly

15 material to Plaintiffs' decision whether to settle their claims. In so doing, Jackson intended to induce

16 Plaintiffs' reliance on Jackson's representations that the projected range of a yet unconsummated

17 settlement was reasonable, thereby inducing Plaintiffs to execute blank pieces of paper that Jackson

18 would later attach to "the settlement agreement" to which Plaintiffs had never consented. Furthermore, in
t
19 the October 9 letter Jackson further actively misled and deceived Plaintiffs by falsely telling them thaf

20 their claims had been substantially weakened by a "recent case" that, if fact, had been decided seven years

21 before being retained by Plaintiffs, and by intentionally misrepresenting the impact that case had on the

22 settlement value of their claims. Finally, in the same| October 9 letter, Jackson sought to deceive, mislead,

23 and frighten Plaintiffs by telling them that another presumably "similar" case (not handled by MILSTEIN

24 attomeys) had gone to trial and that many ofthe homeowners received no recovery at all; and those who
25 did obtained so little there was in fact no net recovery to them after deducting fees and costs. Jackson
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concluded' "We understand that this was a very disappointing result for the homeowners in that case "
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28. As set forth above. Plaintiffs never intended the pages they signed in blank to be attached
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to a settlement agreement to which they had never consented. Had Plaintiffs known the true facts
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Complaint
regarding the costs of repairing their homes, had the "recent case" not been misrepresented to them, and

2 had Jackson not misled and frightened them into believing that their case was "similar" to another case

3 that tumed out extremely unfavorably to the plaintiffs at trial. Plaintiffs would never have signed anything

4 relating to a "settlement" in the range projected by Jackson

5 29. As a direct and proximate result of Jackson's deceit. Plaintiffs' claims against U.S. Home
6 Corporation and other sub-contractor defendants were settled without their informed consent and for a
7
grossly inadequate sum As a further direct and proximate result of Jackson's deceit. Plaintiffs were
8
deprived ofthe opportunify to proceed to trial in the Underlying Action and, had they been afiforded that
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opportunify, it is reasonably foreseeable and likely that Plaintiffs would have prevailed against defendants
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and received ajudgment far in excess ofthe settlement amount, and in no event less than the approximate,
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collective total amount of $1,500,000 00, or, that Plaintiffs would have received a fair and reasonable
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settlement far in excess ofthe amount they received; under the unauthorized settlement agreement, in an
13
amount to be proved at trial.
14
30 The conduct of MILSTEIN and Jackson was fraudulent because they intentionally
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deceived Plaintiffs and concealed material facts from them with the intent of depriving Plaintiffs of
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properfy and legal rights and otherwise causing them damage. The conduct of Jackson, as set forth
17

18 herein, was also malicious and oppressive because it was despicable conduct carried on in willful and

19 conscious disregard for the rights of Plaintiffs and subjected Plaintiffs to an unjust hardship in conscious

20 disregard of their rights. Piaintiffs are therefore entitled to an award of punitive damages in an amount to

21 be proved at trial.

22 FOURTH CAUSE OF ACTION

23 (Constructive Fraud)

24 31. Plaintlffs incorporate herein by reference paragraphs 1-13, 15-17, and 22-25 above as if
25 each were fully set forth herein.
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32. By virtue ofthe fiduciary dufy owed by Defendant and Jackson to Plaintiffs, Defendani
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and Jackson stood in a position of trust and confidence vis-a-vis Plaintiffs. As a result of Jackson's breach
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of fiduciary dufy as alleged herein, MILSTEIN gained an advantage over Piaintiffs by: (1) terminating the
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Complaint
1 Underlying Action early on in the litigation process before any significant amount of discovery, if any at

2 all, had been undertaken; (2) by receiving an excessive attomey's fee in light ofthe minimum amount of

3 time spent on the case up to the time of settlement; and (3) by avoiding its contractual obligation to

4 advance future litigation costs had the case proceeded to trial, which Jackson told Plaintiffs in the Octobei

5 9 letter was in the range of $500,000 - $700,000 The advantage gained by Defendant was to the extreme
6 prejudice and detriment of Plaintiffs and was accomplished by, among other things, concealing from
7 Plaintiffs the result of their expert's estimates ofthe costs ofrepairing Plaintiffs' homes, by falsely telling
8
Plaintiffs that a "recent case" made it very unlikely that Plaintiffs would recover more than approximately
9
$8,000.00 per home at the most; and by misleading and frightening Plaintiffs into believing that a recent
10
"similar" case had gone to trial and tumed out very unfavorably to the plaintiff homeowners.
II
33. As a direct and proximate result of Jackson's fraud. Plaintiffs' claims against U.S. Homes
12 I

Corporation and other defendants were settled without their informed consent and for a grossly
13
inadequate sum. As a fiarther direct and proximate result of Jackson's fraud, Plaintiffs were deprived of
14

15 the opportunify to proceed to trial in the Underlying Action and, had they been afforded that opportunify,

16 it is reasonably foreseeable and likely that Plaintiffs would have prevailed against U.S. Home Corporation

17 and other defendants and received ajudgment far in excess ofthe settlement amount, and in no event less

18 than the approximate, collective total amount of $1,500,000 00; or that Plaintiffs would have received a

19 fair and reasonable settlement far in excess ofthe amount they received under the unauthorized settlement

20 agreement, in an amount to be proved at trial.

21 WHEREFORE, Plaintiffs pray forjudgment against Defendant as set forth below

22 FIFTH CAUSE OF ACTION


23 (Breach of Contract)
24 34. Plaintiffs incorporate herein by reference paragraphs 1-33 above as if each were fully set
25
forth herein.
26
35. Defendant entered into a written contract with Plaintiffs.
27
36. Plaintiffs performed all ofthe conditions and promises required ofthem by the contract
28
they had with MILSTEIN.
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Complaint
1 37. By virtue ofthe conduct described herein. Defendant breached the implied terms ofthose

2 contracts as set forth in Paragraph 5 above.

3 38. As a direct and proximate result of Defendant's breach of contract. Plaintiffs' claims

4 against U.S. Homes Corporation and other defendants were settled without their informed consent and foi

5 a grossly inadequate sum. As a further direct and proximate result of Defendant's breach of contract,
6 Plaintiffs were deprived ofthe opportunify to proceed to trial in the Underlying Action and, had they been
7
afforded that opportunify, it is reasonably foreseeable and likely that Plaintiffs would have prevailed
8
against U S. Home Corporation and other defendants and received a judgment far in excess of the
9
settlement amount, and in no event less than the approximate, collective total amount of $1,500,000 00; or
10
that Plaintiffs would have received a fair and reasonable settlement far in excess of the amount they
II
received under the unauthorized settlement agreement, in an amount to be proved at trial.
12
SDCTH CAUSE OF ACTION
13
(Unjust Enrichment)
14
39. Plaintiffs incorporate herein by reference paragraphs 1-5 above as if each were fully set
15
forth herein.
16
40. The contracts herein referred to were entered into in violation of Section 6147(a)(2) of
17

18 the California Business & Professions Code ("BPC") and Plaintiffs hereby declare said contracts void

19 pursuant to Section 6147(b) ofthe BPC. Accordingly, MILSTEIN is not entitled to retain the attorney

20 fees collected from Piaintiffs under the terms of said contracts in the amount of 40% of the recovery,

21 MILSTEIN IS entitled only to the reasonable value of their services and Plaintiffs allege, on information

22 and belief, that MILSTEIN has been unjustly enriched by receiving a 40% fee that is far in excess ofthe

23 reasonable value of their services to Plaintiffs in the Underlying Action.

24 41. Accordingly, Plaintiffs hereby seek to recoup the amount ofthe fees paid to MILSTEIN
25 in excess ofthe fair market value of their services, in' an amount to be detennined at the trial hereof.
26
WHEREFORE, Plaintiffs pray forjudgment against MILSTEIN as follows:
27
1. For damages in the collective minimum amount of $ 1,500,000.00,
28
2. For pre-judgment interest thereon,
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Complaint
3. For punitive damages in an amount to be proved at trial,

2 4. For recoupment of attomey's fees paid to MILSTEIN in excess ofthe fair market value of

3 their services,

4 5. For costs of suit herein, and

5 6. For such other and further reliefas the court may deem just and proper.
6 DATED- June 18, 2010
7
LAW OFFICE OF EUGENE P. HAYDU
8

10 Eugene P Haydu
Attomey for Plaintiffs
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Complaint