Case Number: BC671793 Hearing Date: August 22, 2018 Dept: 50

Superior Court of California

County of Los Angeles

Department 50

robert palmer,

Plaintiff,

vs.

brenda phillips, et al.,

Defendants.

Case No.:

BC 671793

Hearing Date:

August 22, 2018

Hearing Time:

8:30 a.m.

[TENTATIVE] ORDER RE:

DEFENDANTS’ SPECIAL MOTION TO STRIKE PLAINTIFF’S FIRST AMENDED COMPLAINT PURSUANT TO CODE CIV. PROC. § 425.16

Background

Defendants Lewitt, Hackman, Shapiro, Marshall & Harlan, ALC (“Lewitt Hackman”), Paul C. Bauducco (“Bauducco”) and Nicholas Kanter (“Kanter”) (collectively, the “LH Defendants”) bring this special motion to strike the First Amended Complaint (“FAC”) of Plaintiff Robert Palmer (“Palmer”). Defendant Brenda Phillips (“Phillips”) joins the special motion to strike.

The FAC asserts causes of action for malicious prosecution, abuse of process, intentional infliction of emotional distress, intentional interference with prospective economic relations, and negligent hiring and supervision.[1] The allegations of the FAC arise from a failed business relationship between Palmer and Phillips that resulted in a lawsuit initiated by Phillips against Palmer (the “Underlying Action”). In the Underlying Action, Phillips asserted claims of fraud, professional negligence, and breach of fiduciary duty as against Palmer and his employer Ameriprise Financial Services, Inc. (“Ameriprise”) concerning Phillips’ investment in two limited liability companies formed to hold an investment in a nightclub and restaurant. (LH Defendants’ Compendium of Exhibits (“LH Compendium”), Ex. 2.) Palmer filed for bankruptcy protection, and Phillips initiated an adversary proceeding in Palmer’s bankruptcy case based on the same allegations. (Bauducco Decl., ¶ 15.) The Underlying Action was eventually voluntarily dismissed by Phillips as against Palmer after she settled with Ameriprise. (Bauducco Decl., ¶¶ 15, 17-19; LH Compendium, Ex. 14, 15.) A Cross-complaint filed by Palmer in the Underlying Action was also dismissed. (LH Compendium, Ex. 18.)

Request for Judicial Notice

The Court grants the LH Defendants’ request for judicial notice (Items 1-18).

The Court grants Palmer’s request for judicial notice as to Items 3, 6, 7, and 8. The Court denies Palmer’s request for judicial notice as to Items 1, 2, 4, 5, 9, 10, and 11. The request as to Items 1 and 2 are denied on the basis that Palmer has not furnished the court with sufficient information to enable it to take judicial notice of the matter, i.e., a copy of the bankruptcy docket. ((See Evid. Code, § 453); (Cal. Rules of Court, rule 3.1306(c).)

Evidentiary Objections

Prior to the original hearing on this matter, the Court indicated its intent to continue the hearing due to the voluminous objections that were filed by the LH Defendants and due to the fact that Palmer had submitted an opposition that failed to properly cite to evidence. At the hearing, the LH Defendants withdrew all of their objections except Nos. 56-64 to the Declaration of Robert Palmer. The Court also granted Palmer leave to file his responses to those objections at the same time he was to file a corrected opposition. The LH Defendants were permitted to either rely on their existing reply or to file and serve a new reply responding to the corrections in the opposition.

Upon review of Palmer’s responses to the remaining evidentiary objections by the LH Defendants and their reply thereto, the Court rules as follows:

No. 56: sustained

No. 57: overruled

No. 58: sustained only as to the portion containing “…Defendants [sic] [p]olicy of intimidation. Defendants used every opportunity to intimidate or misinform me of the actual rules of court;” otherwise, overruled

No. 59: sustained only as to the portion containing “The evidence and law was clearly on my side…;” otherwise, overruled

No. 60: sustained

No. 61: sustained

No. 62: sustained as to the portion containing “Defendants tried to force me…” and “…intentionally filed a knowing false order to embarrass Palmer;” otherwise, overruled

No. 63: sustained as to the portion containing “This is not the first time Defendants have made intentional misrepresentations to the court in an attempt to discredit or bully Palmer” and “…willing [sic] attempted to mislead the judge about my participation in Discovery…;” otherwise, overruled

No. 64: sustained

Discussion

The anti-SLAPP statute (Code of Civil Procedure section 425.16) is “a mechanism through which complaints that arise from the exercise of free speech rights can be evaluated at an early stage of the litigation process and resolved expeditiously.” ((Simmons v. Allstate Ins. Co. (2001) 92 Cal.App.4th 1068, 1073 [internal quotations omitted].) Courts use a two-step process for determining whether an action is a strategic lawsuit against public participation, or a SLAPP. First, the court determines whether the defendant has established that the challenged claim arises from protected speech. ((Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67.) If such a showing has been made, the court “determines whether the plaintiff has demonstrated a probability of prevailing on the claim.” (Ibid. .)

Prong One – Arising from Protected Conduct

“[T]he only thing the defendant needs to establish to invoke the protection of the SLAPP statute is that the challenged lawsuit arose from an act on the part of the defendant in furtherance of her right of petition or free speech.” ((Fox Searchlight Pictures, Inc. v. Paladino (2001) 89 Cal.App.4th 294, 307.)

An act in furtherance of a person’s right of petition or free speech includes the following:

(1) any written or oral statement or writing made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law, (2) any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law, (3) any written or oral statement or writing made in a place open to the public or a public forum in connection with an issue of public interest, or (4) any other conduct in furtherance of the exercise of the constitutional right of petition or the constitutional right of free speech in connection with a public issue or an issue of public interest.

((Code Civ. Proc., § 425.16(e).)

In determining whether a cause of action arises from protected conduct, the court focuses on “the allegedly wrongful and injury-producing conduct that provides the foundation for the claims.” ((Castleman v. Sagaser (2013) 216 Cal.App.4th 481, 490-491.) “[T]he critical consideration is whether the cause of action is based on the defendant’s protected free speech or petitioning activity.” ((Navellier v. Sletten (2002) 29 Cal.4th 82, 89.) In making this determination, the Court considers “the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based.” (Ibid. .) “The anti-SLAPP statute should be broadly construed and a plaintiff cannot avoid operation of the anti-SLAPP statute by attempting, through artifices of pleading, to characterize an action as a garden variety tort claim when in fact the liability claim is predicated on protected speech or conduct.” ((Ramona Unified School Dist. v. Tsiknas (2005) 135 Cal.App.4th 510, 519 [internal citations omitted].)

Under the language of Code of Civil Procedure section 425.16, subdivision (e)(1) and (e)(2), statements and writings made during or in connection with judicial proceedings are protected by the anti-SLAPP statute. A statement or writing is “in connection with” litigation if it “relates to the substantive issues in the litigation and is directed to persons having some interest in the litigation.” ((Neville v. Chudacoff (2008) 160 Cal.App.4th 1255, 1266); (see also Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1056 [anti-SLAPP statute protects “communicative conduct such as the filing, funding, and prosecution of a civil action”].) It need not be shown that the litigated matter is of public interest. ((Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th 1106, 1123.) Communications preparatory to or in anticipation of litigation are equally entitled to the benefits of Code of Civil Procedure section 425.16. (Id. at p. 1115.) To be protected, the pre-litigation statements must be “made in connection with a proposed litigation that is contemplated in good faith and under serious consideration.” ((A.F. Brown Electrical Contractor, Inc. v. Rhino Electric Supply, Inc. (2006) 137 Cal.App.4th 1118, 1128 [internal quotations omitted].) Code of Civil Procedure section 425.16 is construed broadly and protects communications that have “some relation” to judicial proceedings. ((Contemporary Services Corp. v. Staff Pro Inc. (2007) 152 Cal.App.4th 1043, 1055.)

The LH Defendants characterize the root of Palmer’s claims as essentially the assertion that Phillips engaged in a conspiracy to pursue meritless claims against Palmer based on fraudulent and/or nonexistent evidence. (See, e.g., FAC, ¶¶ 54-64.) The LH Defendants were allegedly the instruments of this conspiracy, brandished during discovery in the Underlying Action to threaten and intimidate Palmer. Specifically, in support of the abuse of process cause of action, Palmer alleges that the LH Defendants made false statements to FINRA and the California State Bar about Palmer. (FAC, ¶ 66.) Palmer alleges that the LH Defendants sent letters “to intimidate [Palmer] from speaking to witnesses, intentionally mail[ed] discovery requests to the wrong address in attempts to shorten Palmers [sic] time to respond, serv[ed] him with an oppressive amount of intrusive [discovery requests,]…used the meet and confer communications to threaten and intimidate Palmer stating false facts such as they enter default judgment on him for not being able to pay sanctions or that Palmer would never become an attorney if he did not settle this case and drop his cross-complaint.” (FAC, ¶ 68.) Other statements allegedly made by the LH Defendants include statements that “Palmer should have to drop out of law school or have his cross-complaint dismissed if he could not commence trial on the date convenient for Phillips, Palmer should have his cross-complaint dismissed and judgment entered against him since he suffered a mental health emergency that required medical attention, or [Bauducco’s] demands of a court ordered mutual dismissal when Palmer was prepared and had the evidence to prevail at trial.” (FAC, ¶ 70.) The same allegations regarding the statements made to FINRA and the State Bar, as well as the allegation that the LH Defendants knowingly made “false allegations of moral turpitude” in the Underlying Action and in the bankruptcy adversary proceeding, support the causes of action for intentional infliction of emotional distress and intentional interference with prospective economic relations. (FAC, ¶¶ 74-75, 80-81.) All of the above factual allegations also support the negligent hiring and supervision cause of action, which purports to hold Lewitt Hackman the law firm liable for training and retaining Bauducco and Kanter, the individual attorneys and Lewitt Hackman employees. (FAC, ¶¶ 85-86, 88.)

The LH Defendants contend that all of Palmer’s claims are premised on litigation or litigation-related activity and therefore all causes of action are subject to the anti-SLAPP statute. Although Palmer concedes that the malicious prosecution cause of action is subject to the anti-SLAPP statute, Palmer contends that the remaining causes of action are supported by allegations based on unprotected activities. Palmer characterizes these allegations as extortion and cites to Flatley v. Mauro (2006) 39 Cal.4th 299 and Mendoza v. Hamzeh (2013) 215 Cal.App.4th 799 in support of the proposition that the anti-SLAPP statute does not apply to litigation communications that constitute criminal extortion. As discussed in Flatley, “Extortion is the threat to accuse the victim of a crime or ‘expose, or impute to him…any deformity, disgrace or crime’ (Penal Code section 519) accompanied by a demand for payment to prevent the accusation, exposure, or imputation from being made.” (Flatley v. Mauro, supra, 39 Cal.4th at p. 332, fn. 16.) The Supreme Court went on to note that “our opinion should not be read to imply that rude, aggressive, or even belligerent prelitigation negotiations, whether verbal or written, that may include threats to file a lawsuit, report criminal behavior to authorities or publicize allegations of wrongdoing, necessarily constitute extortion. (Ibid.) Palmer proffers no evidence that any of the statements made by the LH Defendants were criminally extortionate as a matter of law. In particular, there is no allegation and no evidence that any LH Defendant demanded a payment of money in connection with any of the alleged threats. Accordingly, the Court finds that the LH Defendants and Phillips have shouldered their burden on prong one of showing that the claims arise from protected activity. The burden thus shifts to Palmer to demonstrate a probability of prevailing on the merits of the action.

Prong Two – Probability of Prevailing

“[P]laintiff must demonstrate that the complaint is both legally sufficient and supported by a sufficient prima facie showing of facts to sustain a favorable judgment if the evidence submitted by the plaintiff is credited.” ((Premier Med. Mgmt. Sys., Inc. v. California Ins. Guarantee Assn. (2006) 136 Cal.App.4th 464, 476 [internal quotations omitted].) In making its determination, “the court shall consider the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based.” ((Code Civ. Proc., § 425.16(b)(2).) “The court does not, however, weigh [defendant’s] evidence against the plaintiff’s, in terms of either credibility or persuasiveness. Rather, the defendant’s evidence is considered with a view toward whether it defeats the plaintiff’s showing as a matter of law, such as by establishing a defense or the absence of a necessary element.” ((1-800 Contacts, Inc. v. Steinberg (2003) 107 Cal.App.4th 568, 585.)

The LH Defendants contend that Palmer’s claims fail because they are time-barred; the LH Defendants and Phillips contend that Palmer’s claims fail because, inter alia, the litigation privilege serves as an absolute bar to the remaining claims, and because Palmer cannot demonstrate any of the elements of malicious prosecution.

Time-Barred Claims

Code of Civil Procedure section 340.6, subdivision (a) provides that any claim against an attorney “arising in the performance of professional services” must be brought within one year of a plaintiff’s discovery of facts constituting the basis for the claim, assuming none of the statute’s enumerated tolling provisions apply. ((Code Civ. Proc., § 340.6(a).) In Lee v. Hanley (2015) 61 Cal.4th 1225 (Lee), the Supreme Court of California held that section 340.6, subdivision (a) “applies to a claim when the merits of the claim will necessarily depend on proof that an attorney violated a professional obligation—that is, an obligation the attorney has by virtue of being an attorney—in the course of providing professional services” (Id. at p. 1229 [emphasis in original].) In coming to this conclusion, the Supreme Court expressly disapproved of language in Roger Cleveland Golf Co., Inc. v. Krane & Smith, APC (2014) 225 Cal.App.4th 660, 677 (Roger Cleveland) suggesting that section 340.6 was “a professional negligence statute.” (Lee, supra, 61 Cal.4th at p. 1239.) Instead, the Supreme Court held that the phrase “arising in the performance of professional services” does not limit the scope to legal malpractice claims but also “covers a broader range of wrongful acts or omissions that might arise during the attorney-client relationship” so long as the claim depends on proof that an attorney “violated a professional obligation as opposed to some generally applicable nonprofessional obligation.” (Id. at pp. 1233, 1238.)

The LH Defendants argue that because all of Palmer’s claims arise from the LH Defendants’ professional obligation as attorneys, Palmer’s claims are time-barred. Palmer counters that the Supreme Court’s disapproval of Roger Cleveland in Lee was limited to the language regarding section 340.6 being a “professional negligence statute.” The Lee court did not analyze Roger Cleveland’s “ultimate conclusion that section 340.6(a) is inapplicable to claims filed against a former litigation adversary’s attorney.” ((Parrish v. Latham & Watkins (2017) 3 Cal.5th 767, 775 [declining to reach the limitations issue].) According to Palmer, then, the holding in Roger Cleveland that a two-year limitations period controls on malicious prosecution actions against a former litigation adversary’s attorney is still good law. ((Roger Cleveland, supra, 225 Cal.App.4th at p. 689.) While Palmer is correct insofar as Roger Cleveland was not overruled by Lee (in contrast to the LH Defendants’ argument in reply that Roger Cleveland was “expressly overruled” in Lee), there still remains a split in authority on the issue. ((See Bergstein v. Stroock & Stroock & Lavan LLP (2015) 236 Cal.App.4th 793, 819 [acknowledging a split in authority but declining to follow Roger Cleveland in finding that section 340.6 applies to actions by a third party against an attorney].) Without further clarification from the Supreme Court, the Court thus follows the plain language of section 340.6 applying the one-year statute of limitations to this action, as one “against an attorney for a wrongful act or omission, other than for actual fraud, arising in the performance of professional services.” ((Code Civ. Proc., § 340.6(a)); see also Bergstein, supra, 236 Cal.App.4th at p. 819.) The undisputed evidence shows that all of the LH Defendants’ allegedly wrongful conduct occurred during the performance of legal services for Phillips. Therefore, because Palmer brought this action more than one year after his claims accrued (by August 12, 2015, the date Phillips dismissed her claims against him in the Underlying Action) and because there is no evidence of any basis for tolling the statute of limitations under section 340.6, the action is barred. Accordingly, the Court finds that Palmer has failed to shoulder his burden of showing a probability of prevailing on the merits of any of his claims against the LH Defendants.

Litigation Privilege

The Court notes that Phillips filed a joinder to the LH Defendants’ motion seeking to have the FAC dismissed as against her on the same grounds as presented by the LH Defendants, except with regard to the statute of limitations argument. The Court now proceeds to a determination of the other arguments in support of the special motion to strike. [2]

The LH Defendants and Phillips contend that the litigation privilege bars all causes of action except for malicious prosecution. Civil Code section 47, subdivision (b) states: “[a] privileged publication or broadcast is one made . . . [i]n any (1) legislative proceeding, (2) judicial proceeding, (3) in any other official proceeding authorized by law, or (4) in the initiation or course of any other proceeding authorized by law and reviewable pursuant to Chapter 2.” The litigation privilege has broad application. ((Hagberg v. California Federal Bank (2004) 32 Cal.4th 350, 355, 375.) It applies to statements made prior to legal proceedings, or afterwards, if the statements are made in furtherance of the objects of the proceedings. ((Falcon v. Long Beach Genetics, Inc. (2014) 224 Cal.App.4th 1263, 1272.) In other words, the statements must “be connected with, or have some logical relation to, the [proceeding].” ((Ibid., citing Hawran v. Hixson (2012) 209 Cal.App.4th 256, 283) The LH Defendants contend that because Palmer seeks damages for statements and communicative conduct directly related to their representation of Phillips in the Underlying Action, the litigation privilege bars the non-malicious prosecution causes of action. With respect to Phillips, the only causes of action that are at issue are the abuse of process and intentional infliction of emotional distress causes of action. The predicate for Phillips’ alleged liability for abuse of process is the conduct of Phillips’ attorneys at Lewitt Hackman. Therefore, the litigation privilege bars Palmer’s abuse of process claim against both the LH Defendants and Phillips. Similarly, the intentional infliction of emotional distress cause of action is premised on the filing of the Underlying Action and the bankruptcy adversary proceeding and the LH Defendants’ conduct during those proceedings. (FAC, ¶¶ 74-75.) Accordingly, the litigation privilege acts as a bar to the intentional infliction of emotional distress claim.

The Merits Regarding Malicious Prosecution

Finally, with respect to the malicious prosecution cause of action, the Court finds that Palmer has failed to show a probability of prevailing on the merits. “‘To establish a cause of action for the malicious prosecution of a civil proceeding, a plaintiff must plead and prove that the prior action (1) was commenced by or at the direction of the defendant and was pursued to a legal termination in his, plaintiff’s, favor [citations]; (2) was brought without probable cause [citations]; and (3) was initiated with malice [citations].’” ((Lanz v. Goldstone (2015) 243 Cal.App.4th 441, 458, quoting Bertero v. National General Corp. (1974) 13 Cal.3d 43, 50.)

“The element of favorable termination … calls for a termination reflecting on the merits of the action and the plaintiff’s innocence of the misconduct alleged.” ((Sierra Club Foundation v. Graham (1999) 72 Cal.App.4th 1135, 1149.) “If resolution of the underlying action leaves a residue of doubt about the plaintiff’s innocence or liability, it is not a favorable termination sufficient to support a cause of action for malicious prosecution.” ((Ibid. .) A dismissal is a termination on the merits “if it reflects the opinion of either the court or the prosecuting party that the action would not succeed.” ((Haight v. Handweiler (1988) 199 Cal.App.3d 85, 88.)

Palmer argues that Phillips’ voluntary dismissal of the Underlying Action is a favorable termination on the merits because at the time of dismissal, he had successfully had the Underlying Action remanded from bankruptcy court to state court and had informed counsel for Phillips (the LH Defendants, presumably) that he was going to appear ex parte for leave of court to file a motion for judgment on the pleadings. (Palmer Decl., ¶ 61.) Bauducco sent an email in response to Palmer’s ex parte notice informing him of Phillips’ intent to dismiss the Underlying Action on account of both her and Palmer’s bankruptcies. (LH Compendium, Ex. 14.) Palmer contends that Bauducco’s stated reasons for dismissing the Underlying Action are not credible because 1) Palmer has never had any assets to recover, 2) Phillips had just aggressively opposed remand of the bankruptcy proceeding, 3) trial on Palmer’s Cross-Complaint in the Underlying Action was imminent, 4) there is a legal assumption that a plaintiff does not simply abandon a meritorious action once instituted, 5) under the federal rules, a voluntary dismissal is an adjudication on the merits, and 6) Phillips did not achieve favorable results in her opposition to Ameriprise’s motion for summary judgment/adjudication in the Underlying Action. (Opp’n, p. 12: 16-25.)

The Court notes that Palmer fails to cite to any evidence in his recital of “facts” to support his characterization of the events. Even assuming Palmer has submitted evidence sufficient to substantiate these facts, the Court finds that none of the evidence suggests that Phillips believed that the Underlying Action was without merit. As noted by the LH Defendants, a voluntary dismissal of a complaint to avoid further litigation expense militates against a finding of a favorable termination. ((Oprian v. Goldrich, Kest & Associates (1990) 220 Cal.App.3d 337, 344 [“It would be a sad day indeed if a litigant and his or her attorney could not dismiss an action to avoid further fees and costs, simply because they were fearful such a dismissal would result in a malicious prosecution action.”]); (Contemporary Services Corp. v. Staff Pro Inc., supra, 152 Cal.App.4th at p. 1057 [finding that the evidence did not show that defendants sustained any adverse rulings or otherwise had reason to believe their claims would be unsuccessful].) Indeed, the inferences from Palmer’s proffered evidence support a conclusion that Phillips could no longer afford to pursue the matter as it appears that she had diligently and aggressively prosecuted her case until she filed for bankruptcy. The mixed ruling on Ameriprise’s motion for summary judgment in the Underlying Action also supports an inference that continued litigation of the matter would only cost more money. (See LH Compendium, Ex. 11.) In light of the above, the Court finds that Palmer has failed to show probability of prevailing on the malicious prosecution claim because of his failure to show that the Underlying Action was prosecuted to a legal termination in his favor.[3]

Conclusion

Based on the foregoing, the LH Defendants’ Special Motion to Strike Plaintiff’s First Amended Complaint is granted, Phillips’ joinder is granted, and the First Amended Complaint is stricken in its entirety.

The LH Defendants are ordered to provide notice of this ruling.

DATED: August 22, 2018

________________________________

Hon. Teresa A. Beaudet

Judge, Los Angeles Superior Court

[1] All causes of action are asserted against the LH Defendants, but only the malicious prosecution, abuse of process, and intentional infliction of emotional distress causes of action are asserted against Phillips.

[2] If it were to be determined that the statute of limitations applicable to this case is the two-year statute, the discussion below provides a separate basis for this Court’s ruling as to the LH Defendants on the special motion to strike.

[3] It is unnecessary to discuss the other arguments presented by the LH Defendants and Phillips in opposition to the special motion to strike.