The Fandango Statute Of Limitations

The California State Bar Court Review Department overturned the dismissal with prejudice of bar charges on statute of limitations grounds

We disagree with the hearing judge’s ultimate dismissal with prejudice. The ANDC [Amended Notice of Disciplinary Charges] and documents judicially noticed satisfactorily plead that the single charge of moral turpitude by misappropriation occurred within five years of the filing of the original NDC, as tolled by the continuing fiduciary duty Saxon owed his client. We emphasize that the rule of limitations is tolled during the period of time that the attorney acts in a fiduciary relationship, even if it is other than an attorney-client relationship. Accordingly, we remand this case to the Hearing Department for further proceedings consistent with this opinion and order.

The allegations

[Respondent] Saxon is a movie producer who sought investments to fund a movie called “Fandango.” One investor was Jon Yarborough, a resident of Tennessee. On or about October 6, 2009, Saxon and Yarborough entered into a Financing Agreement, whereby Yarborough and Saxon would invest $1.5 million and $3.5 million, respectively (the Combined Financing). The Financing Agreement also stated that all funds would be placed in a certain account defined as the “Picture Account,” or another account approved by Yarborough and Saxon. The funds were to be segregated and used only for production costs, and the Financing Agreement provided that “[a]ny funds advanced to the Picture Account shall be held in trust.” Under the Financing Agreement, Saxon was required to maintain the funds in the Picture Account until receipt of 100 percent of the Combined Financing. He could not withdraw money from the account until it was fully funded with the Combined Financing.

Yarborough wired $1.5 million to the Picture Account on October 21, 2009. Saxon never contributed his $3.5 million share. Instead, it is alleged that the day that Yarborough’s funds were wired to the Picture Account, Saxon transferred the entire $1.5 million to a different account, not approved by the parties.

Yarborough sued and secured a Tennessee judgment and sought to enforce it in California. Saxon declared bankruptcy.

The bankruptcy court determined that Saxon defalcated the $1.5 million when he fraudulently transferred the funds from the Picture Account without having first deposited his own $3.5 million in that account.

On timing 

we find that Saxon was acting as a fiduciary by holding funds in escrow, having been given precise instructions by the Financing Agreement. He remained in the capacity of a fiduciary with an obligation to hold the escrowed funds “in trust” until the Fandango production was completed and the purpose of the escrow fulfilled. As such, contrary to Saxon’s argument, the extension of the period of limitations was not endless—it ended when its purpose ended, and its purpose was the production. The ANDC states that the film was released in 2014, which would indicate that Saxon’s escrow responsibilities would be terminated at that time.

The five year statute of limitations did not run

When Saxon no longer represented Yarborough within the meaning of rule 5.21(C)(1), the five year limit was no longer tolled, and began to run. But since we calculate the limitations period from the date of the filing of the original NDC, which was December 19, 2018, we find it was timely filed within five years from the 2014 completion of the escrow arrangement alleged in the ANDC.

The Los Angeles Times had a lengthy story about the Respondent in 2011. (Mike Frisch)