Filed 6/11/20 Barrett v. Reeves CA2/5

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FIVE

JOSEPH M. BARRETT,

Defendant and Appellant,

v.

MICHAEL R. REEVES et al.,

Plaintiffs and Respondents. B295487

(Los Angeles County

Super. Ct. No. BC692766)

APPEAL from an order of the Superior Court of Los Angeles County, Holly E. Kendig Judge. Affirmed.

Affeld Grivakes and Christopher Grivakes for Defendant and Appellant.

Bidna & Keys, Richard D. Keys and Howard M. Bidna for Plaintiffs and Respondents.

__________________________

Attorney Joseph Barrett was sued for malicious prosecution for his part in pursuing, on behalf of his clients, an unsuccessful nine-count cross-complaint against Michael Reeves and his corporate entity MA3 in an underlying action. Attorney Barrett filed a special motion to strike under Code of Civil Procedure, section 425.16, the anti-SLAPP statute, on the basis that he had abandoned all but one cause of action in the underlying cross-complaint, and that the one cause of action he pursued, breach of fiduciary duty against Reeves, was supported by probable cause. The trial court denied the anti-SLAPP motion, on the basis that, regardless of whether there was probable cause to prosecute the breach of fiduciary cause of action, Reeves and MA3 established a prima facie case that Attorney Barrett prosecuted the remainder of the cross-complaint against them without probable cause and with malice. Attorney Barrett appeals. The vast bulk of his argument on appeal, as before the trial court, goes to the issue of whether there was probable cause supporting the breach of fiduciary duty cause of action against Reeves. We conclude, as did the trial court, that regardless of whether there was probable cause to support that cause of action, Reeves and MA3 have established a probability of prevailing on their malicious prosecution action with respect to other causes of action in the underlying cross-complaint. We therefore affirm.

FACTUAL AND PROCEDURAL BACKGROUND

1. The Underlying Dispute
2.
Although Attorney Barrett would limit the discussion of the underlying case to the facts surrounding only the breach of fiduciary duty cause of action his clients alleged against Reeves, an understanding of the context of the broader dispute is relevant to our analysis of probable cause and malice.

A. The Breakup of Finton Construction, Inc.
B.
With the benefit of hindsight provided by the trial court’s opinion in the underlying action, we outline the underlying dispute between the parties.

Finton Construction, Inc. (FCI) was a residential construction corporation originally established by John Finton (Finton) and Michael Reeves (Reeves). A third individual, Daniel Tontini (Tontini), was later added. The dispute in the underlying case arose between Finton and Tontini on one hand and Reeves on the other. Late in the dispute, Finton and Tontini would be represented by Attorney Barrett.

The ownership (and profit percentages) among the three men were originally agreed to as follows: Finton – 40 percent, Reeves – 40 percent, Tontini – 20 percent. Although FCI was a corporate entity, it was operated as a three-man partnership.

Initially, the three men worked out of the same office in Los Angeles. In 2003, FCI had enough business to justify the opening of an Orange County office. Reeves moved to Orange County and operated that office, leaving Finton and Tontini in the Los Angeles office. Prior to moving to Orange County, Reeves had been chief financial officer of FCI and handled the accounting functions; when Reeves moved to Orange County, Finton and Tontini took control of the corporate finances. This move enabled Finton to “manipulate FCI’s financial affairs to his personal advantage to the tune of millions of dollars in excess payments to Finton or to others for his benefit. Tontini received financial benefits for his role in assisting Finton and concealing from Reeves what was happening with the company’s finances.”

By 2010, Finton “decided he wanted to exclude Reeves from FCI.” He and Tontini made a concerted effort to “force Reeves to either resign from the company or cede total control to Finton.” This was revealed by two documents turned over in discovery. Finton had a “To Do List” which listed one of his First Quarter 2010 goals as “Eliminate or dilute M.R.” In March 2010, Tontini sent Finton an email saying that Reeves is “such a pussy. . . . We should strategize Monday on how we turn up the heat on him. I say we go for the throat and break him. His eyes will start twitching and he’ll cave trust me.”

In October 2010, Finton forced Reeves to give up 11 percent of FCI to him for no consideration – thereby achieving Finton’s goal of obtaining majority ownership (51 percent) of FCI. The trial court found this transaction to be the product of fraud and a breach of fiduciary duty by Finton, and therefore void and of no effect.

Finton had been taking excessive amounts of money from FCI, and misrepresenting these amounts to Reeves. By the end of 2010, Finton had taken over $1.8 million from FCI for personal expenses, but represented to Reeves that he had received less than $650,000. After he forced Reeves to give up 11 percent of the corporation, Finton “significantly increased the amounts of money he was taking from FCI,” and continued to hide these amounts by misrepresenting, on the corporate books, that these were “business expenses” rather than the agreed-upon method for booking personal expenses, “officer loans.” At some point in 2011, Finton instructed FCI’s accounting staff that they were not to provide Reeves with access to any of the company’s financial or accounting records. During this same time period, Reeves was questioning the accuracy of the financial information he was being provided, particularly regarding the payments being made to Finton and Tontini above their agreed-upon salaries. Finton and Tortini responded by forcing Reeves out of the company.

On January 12, 2012, Finton wrote Reeves, claiming that Finton no longer trusted Reeves to act in the interests of the company. Finton ominously threatened to “address these issues” upon his return from vacation, at which point he would “consult with attorneys for the [c]ompany and determine the best course going forward.” Acting unilaterally and purportedly effective immediately, Finton claimed to take away any authority Reeves may have “to bind the company for any purpose. Without limiting the scope of this limitation, you may not act with respect to employment matters, may not sign any agreement on behalf of the company, may not sign any company check, nor otherwise act in a way that creates any financial obligation for the [c]ompany.”

Reeves responded, via counsel, with a letter stating that “it appears that the parties are headed toward a separation of their business interests.” He proposed “terms of a business divorce,” under which he would keep the Orange County office and leave the Los Angeles office to Finton and Tontini.

On Wednesday, February 8, 2012, Finton responded, rejecting the offer. Finton’s letter stated, “[W]e are consulting with our legal counsel to determine our rights under your employment agreement with the [c]ompany and the best way forward. We believe that your acts of dishonesty and mismanagement provide ample cause for the termination of your employment with the [c]ompany, and we will soon determine what future course is best for the [c]ompany.”

On the following Monday, February 13, Reeves formally resigned, although his resignation letter began, “I get it. You’ve fired me.” He added that he was resigning as an officer and director of FCI, although he remained a shareholder. The trial court in the underlying action would conclude that “Reeves was forced out of the company by Finton and Tontini and was constructively terminated.”

Between Finton’s letter threatening termination of Reeves on February 8, and Reeves’s formal resignation letter on February 13, Reeves engaged in certain acts which would form the basis of FCI’s claim of breach of fiduciary duty. Specifically, Reeves formed a new construction corporation, MA3. Reeves told several FCI employees in the Orange County office that he was leaving, and gave them the option to remain with FCI or go with him to MA3; several employees left with him. Reeves made similar offers to FCI’s clients in Orange County – many of whom were mid-construction with FCI’s Orange County office; several clients chose to go with Reeves to MA3. Finally, Reeves and some of the employees who left with him took electronic copies of numerous files and documents from the FCI Orange County office.

C. Reeves’s Complaint in the Underlying Action
D.
On February 14, 2012, the day after Reeves formally resigned from FCI, he filed his complaint against FCI, Finton and Tontini. He alleged causes of action for involuntary dissolution of the corporation and breach of fiduciary duty – based on Finton and Tontini having committed financial improprieties and forcing him out of the company. FCI would successfully demur to the cause of action for involuntary dissolution, and the complaint proceeded solely on Reeves’s cause of action for breach of fiduciary duty.

E. FCI and Finton’s Cross-Complaint
F.
On March 19, 2012, FCI and Finton filed their cross-complaint. This is the cross-complaint which, in the current action, Attorney Barrett is alleged to have malicious prosecuted. However, Attorney Barrett was not representing FCI and Finton when the cross-complaint was filed; instead they were represented by Attorney James Evans of Fulbright & Jaworski (and later, Alston & Bird).

The cross-complaint originally named Reeves and several of the employees who left FCI for MA3. Those employees were eventually dismissed and are not parties to the current action. However, a Roe amendment was filed adding MA3 as a defendant. Reeves and MA3 are the plaintiffs in the current malicious prosecution action.

The cross-complaint alleged nine causes of action: (1) Breach of fiduciary duty; (2) interference with contract; (3) interference with prospective economic advantage; (4) unfair business practices (Bus. & Prof. Code, § 17200); (5) conversion; (6) misappropriation of trade secrets (Civ. Code, §§ 3426, et seq.); (7) indemnity; (8) quantum meruit; and (9) unjust enrichment.

Broadly speaking, the causes of action for (1) breach of fiduciary duty, (2) interference with contract, and (3) interference with prospective economic advantage related to Reeves’s alleged inducement of FCI’s clients to leave FCI and hire MA3. The causes of action for (5) conversion and (6) trade secrets related to Reeves’s alleged theft of FCI’s files when he left. The causes of action for (7) indemnity and (8) quantum meruit related to something different. FCI alleged that, at one point while Reeves was still affiliated with FCI, Reeves had entered into an unapproved business venture with one Dr. Don Mills, which ended in litigation Mills brought against FCI, Reeves and Finton, and, ultimately, a judgment for Mills. The indemnity and quantum meruit causes of action sought reimbursement for the amounts FCI paid in building the Mills project, defending itself from the Mills litigation and paying toward the Mills judgment. The remaining causes of action for (4) unlawful business practices and (9) unjust enrichment were catch-alls.

G. Discovery
H.
Extensive discovery was taken. We need not discuss it any level of detail, but three points should be made.

First, discovery revealed that Finton stole millions from FCI. Shortly before trial, Finton stipulated to the accuracy of Reeves’s summaries of personal expenses Finton had charged to the company but failed to book as officer loans. This included over $3.5 million in personal expenses, including over $600,000 which had been misclassified as business expenses.

Second, discovery revealed that certain causes of action in the cross-complaint were unsupported by any evidence. For example, although there was evidence that Reeves took electronic files with him when he left FCI, there was never any evidence that anything he took met the statutory definition of a trade secret.

Third, letters from counsel and deposition transcripts provide evidence suggesting that Attorney Evans – for FCI, Finton and Tontini – was using discovery, at least in part, to warn clients and potential clients away from Reeves and MA3. Specifically, he wrote at least one prospective client of MA3 claiming the need to depose him in connection with the pending cross-complaint, in what appears to have been a successful effort to convince him to steer clear of MA3. In addition, at Attorney Evans’s depositions of clients and business contacts of MA3, he questioned them regarding their knowledge of the allegations made against Reeves in the Mills matter, in what could be interpreted as an attempt to educate them about Reeves’s purported wrongdoing, not to discover any evidence relevant to the underlying action.

I. FCI Sues Reeves’s Trial Counsel
J.
In May 2013, FCI brought suit against Reeves’s trial counsel, Bidna & Keys, alleging causes of action for conversion and receipt of stolen property. One of the FCI employees who had left with Reeves took some electronic data from the company’s computers on a hard drive when she left. She gave that hard drive to Bidna & Keys, the attorneys representing her (and Reeves) in the underlying action. FCI alleged that Bidna & Keys knew the drive was stolen and “wrongfully and unlawfully accepted possession of the [s]tolen [p]roperty” from the employee. In addition to suing Bidna & Keys for this purported misconduct, Finton reported it to the police, who allegedly opened an investigation into the attorneys’ possession of stolen property. FCI also unsuccessfully moved to disqualify Bidna & Keys as counsel in the underlying action. Bidna & Keys successfully prevailed on an anti-SLAPP motion in that case. FCI appealed.

K. The Layfield Firm Becomes Counsel for FCI, Finton and Tontini
L.
On February 25, 2014, FCI, Finton and Tontini retained the Layfield Law Firm to represent them in the underlying action. The Layfield firm also became counsel in the pending appeal of the grant of Bidna & Keys’s anti-SLAPP motion. Attorney Barrett was not, at this time, a member of the Layfield firm; he would join it later.

M. The Court of Appeal Cautions FCI for Scorched Earth Tactics
N.
The appeal of the grant of Bidna & Keys’s anti-SLAPP motion proceeded. Shortly before oral argument, the parties reached a settlement. In June 2015, Division Three of the Fourth Appellate District declined the parties’ request to dismiss the appeal, affirmed the decision in favor of Bidna & Keys, and published its opinion “as an example to the legal community of the kind of behavior the bench and the bar together must continually strive to eradicate.” (Finton Construction, Inc. v. Bidna & Keys, APLC (2015) 238 Cal.App.4th 200, 204–205.)

The appellate court explained, “We find FCI’s conduct with respect to this entire case demonstrative of a particularly nasty type of scorched earth tactics. A purportedly stolen hard drive, which was placed in the hands of defendants solely for litigation purposes, has resulted in an attempt to disqualify counsel and two efforts to depose counsel in the underlying case, a police report, complaints to the State Bar of California, and this entirely derivative and unmeritorious second lawsuit. FCI’s overreach does not suggest zealousness or righteousness, but a calculated effort to undermine the parties in the underlying case by turning their attorneys into fellow defendants. [¶] While we strongly suspect that FCI is the prime mover behind the prosecution of this lawsuit, we remind FCI’s counsel – and indeed, all attorneys – that while they owe their clients a duty to zealously represent them, that zealousness does not trump the duty they owe the courts and the judicial process to prosecute only lawsuits with merit. The type of uncivil behavior and specious tactics demonstrated by filing this case represents conduct that brings disrepute to the entire legal profession and amounts to toying with the courts.” (Finton Construction, Inc. v. Bidna & Keys, APLC, supra, 238 Cal.App.4th at p. 204.)

O. Attorney Barrett Joins the Representation
P.
In January 2016, Attorney Barrett joined the Layfield firm. The underlying litigation was headed toward trial, which would commence in May 2016.

According to Attorney Barrett, he was asked by Layfield to act as trial counsel, with respect to the cross-complaint only, a few weeks before the first day of trial. The parties in the current malicious prosecution action dispute exactly how much investigation Attorney Barrett did into the validity of the cross-complaint before taking on the task. In truth, it is not entirely clear whether Attorney Barrett claims to have performed any investigation before agreeing to try the cross-complaint. Attorney Barrett’s declaration itself states that he reviewed certain materials “[i]n preparation for the trial,” – not that he reviewed anything prior to coming on board. Moreover, because the defense of Reeves’s complaint in the underlying action continued to be in the hands of other attorneys at the Layfield firm, it may well be that Attorney Barrett concentrated his efforts only on the evidence he would be presenting in support of the cross-complaint, and failed to learn the “big picture” of the case.

Q. The Cross-Complaint is Quietly “Streamlined”
R.
Attorney Barrett asserts that, during trial preparation, he and the rest of the Layfield trial team “agreed to streamline the case by narrowing the [c]ross-[c]omplaint to FCI’s claim for breach of fiduciary duty only, against Reeves only. We dropped the other claims, and we decided not to present a claim against MA3. We decided to focus on the three or so days before Reeves’[s] resignation when he began the process of setting up a competing company and began contacting FCI clients. I adopted this approach shortly after first getting involved with the case, immediately after reviewing the facts and evidence.”

The problem, however, was that nobody at Layfield shared this supposed “streamlining” decision with Reeves, MA3 or their counsel. MA3 was not voluntarily dismissed. No causes of action were voluntarily dismissed. Indeed, the Layfield firm submitted – or had submitted and failed to withdraw – proposed jury instructions on nearly every cause of action in the cross complaint, including not only (1) breach of fiduciary duty, but (2) intentional interference with contract, (3) intentional interference with prospective economic advantage; (5) conversion, (6) misappropriation of trade secrets, and (8) comparative fault with respect to the Mills action.

S. Attorney Barrett Withdraws Opposition to Two Motions in Limine
T.
Before trial, Reeves had filed motions in limine to (1) preclude reference to alleged conversion and (2) preclude any relief based on, or reference to, alleged trade secrets. On May 12, 2016, when the motions in limine were heard, Attorney Barrett withdrew the oppositions previously filed to those motions. The motions were granted, thus finally disposing of the cross-complaint’s causes of action for (5) conversion and (6) misappropriation of trade secrets. Voir dire began the same day.

U. Trial Commences
V.
The case proceeded to trial on Reeves’s complaint for breach of fiduciary duty and the cross-complaint of FCI and Finton for their remaining causes of action. The date on which Reeves rested with respect to his complaint and Attorney Barrett began presenting evidence on the cross-complaint is not clear from the appellate record. This much is agreed: The case began in May 2016, and the case was given to the jury on June 17, 2016. The trial took place over 17 court days, with Reeves presenting his case first. Attorney Barrett stated that prosecution of the cross-complaint began on the 12th day of trial, but does not identify that date. An excerpt from the reporter’s transcript shows that Attorney Barrett conducted questioning of witnesses as early as June 6.

Reeves’s case was tried to the court, but FCI and Finton demanded a jury trial on their cross-complaint. Although the jury’s only task was the cross-complaint, it was instructed that it could consider all of the evidence it heard. Relevant to that, the jury was instructed that both parties relied on the defense of unclean hands.

W. Jury Instruction Conference
X.
During jury instruction discussions on or about June 13, 2016, Attorney Barrett finally informed counsel for Reeves that FCI and Finton sought instruction only on breach of fiduciary duty, which had been alleged against Reeves only.

Y. MA3 Obtains a Directed Verdict
Z.
On June 15, 2016 – more than a month after Attorney Barrett had decided, sub silentio, that he was not pursuing any claims against MA3, and after nearly the entirety of a trial in which MA3 was a party – MA3 moved for a directed verdict. Attorney Barrett said there was no opposition and the motion was granted.

AA. Reeves’s Motion for Directed Verdict is Denied
BB.
Reeves then moved for a directed verdict on the breach of fiduciary duty cause of action against him – specifically on the grounds of causation. Reeves argued that even if he had persuaded clients to leave FCI while he was still an officer or director of the corporation, the clients would have left anyway had he asked them a day or two later when he was no longer an officer or director. The trial court turned to Attorney Barrett and said, “Okay. You may be heard for the record. I am not going to grant it.” Attorney Barrett declined to be heard. The motion for directed verdict was denied; the basis for the court’s ruling unstated.

CC. Reeves Prevails on Breach of Fiduciary Duty Before the Jury
DD.
On June 17, 2016, the jury deliberated and reached its verdict on the cause of action for breach of fiduciary duty in the cross-complaint. It found in favor of Reeves. The verdict was unanimous, and the jury had been out for less than an hour.

According to counsel for Reeves, when counsel spoke with the jurors afterward, they claimed to have reached their verdict in less than three minutes, but felt it would be inappropriate to return so quickly, so chatted for a half-hour.

EE. Reeves Prevails on the Remaining Causes of Action in the Cross-Complaint
FF.
The bench trial on Reeves’s complaint continued on June 21, 2016. That day, Reeves moved for judgment on the remaining causes of action of the cross-complaint. The motion was granted without objection.

GG. Reeves Prevails on the Complaint
HH.
Reeves also prevailed in the bench trial on his complaint for breach of fiduciary duty against FCI, Finton and Tontini. The victory was overwhelming. The court concluded there was clear and convincing evidence that Finton and Tontini had breached their fiduciary duty to Reeves. In listing Finton’s numerous breaches of fiduciary duty against Reeves, the trial court noted that the breaches included causing FCI to pay over $1 million to defend Finton from Reeves’s claims and “to prosecute a meritless cross-complaint against Reeves for Finton’s own benefit.” The court awarded Reeves $3,610,568 against FCI; and $2,239,329 against Finton and Tontini jointly and severally – both amounts were before prejudgment interest. Punitive damages were also awarded, in the amount of $1 million against Finton and $500,000 against Tontini.

Judgment was entered in favor of Reeves on October 3, 2016.

3. The Current Malicious Prosecution Action
4.
On October 2, 2017, Reeves and MA3 filed their malicious prosecution complaint against all of the attorneys and law firms which had prosecuted the cross-complaint against them. The only defendant who is a party to this appeal is Attorney Barrett. Reeves and MA3 alleged the complaint was false the day Attorney Evans filed it, and confirmed to be false by discovery, but nonetheless maliciously pursued by Attorney Barrett.

5. Attorney Barrett’s Anti-SLAPP Motion
6.
On June 1, 2018 – pursuant to a stipulation and order extending the time for him to do so – Attorney Barrett filed his anti-SLAPP motion.

“Resolution of an anti-SLAPP motion ‘requires the court to engage in a two-step process. First, the court decides whether the defendant has made a threshold showing that the challenged cause of action is one arising from protected activity. The moving defendant’s burden is to demonstrate that the act or acts of which the plaintiff complains were taken “in furtherance of the [defendant]’s right of petition or free speech under the United States or California Constitution in connection with a public issue,” as defined in the statute. [Citation.] If the court finds such a showing has been made, it then determines whether the plaintiff has demonstrated a probability of prevailing on the claim.’ [Citation.]” (Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 733.)

In this case, there is no dispute that the malicious prosecution cause of action arises from protected activity. (See Jarrow Formulas, supra, 31 Cal.4th at p. 735.) Thus, the case turns on the second prong: whether Reeves has demonstrated a probability of prevailing. There are three elements of a malicious prosecution action – favorable termination, absence of probable cause, and malice. (Zamos v. Stroud (2004) 32 Cal.4th 958, 965–966.) Attorney Barrett cannot seriously dispute that every cause of action in the cross-complaint was terminated in favor of Reeves and MA3. Thus, the anti-SLAPP motion came down to the other two elements: absence of probable cause and malice.

In his anti-SLAPP motion, Attorney Barrett argued only that the cause of action for breach of fiduciary duty against Reeves was supported by probable cause. He took the position that the remaining causes of action were not relevant because they were not “pursued at trial.” Attorney Barrett did not assert that he had abandoned the other causes of action as meritless, but simply stated that he had chosen not to pursue them to streamline the case.

Attorney Barrett also argued that Reeves and MA3 would be unable to establish malice.

Attorney Barrett supported his motion with a declaration, in which he explained that he had been brought in as trial counsel on the cross-complaint two to three weeks before the first day of trial. During his trial preparation, he reviewed key documents, trial exhibits, the operative pleadings, and depositions from important witnesses. He also stated that he spoke with Finton and Tontini, who provided him with an account consistent with their depositions. Attorney Barrett stated, “At all times I believed what they were telling me was accurate.” He stated that he harbored no malice or ill will toward Reeves or MA3; he simply believed that FCI had a legitimate claim against Reeves for breach of fiduciary duty, and sought a victory on the merits for his client.

7. Reeves and MA3 Oppose the Anti-SLAPP Motion
8.
In opposition to Attorney Barrett’s anti-SLAPP motion, Reeves and MA3 argued that Attorney Barrett pursued the entirety of the cross-complaint against them without probable cause. Reeves and MA3 in no way limited their analysis to the breach of fiduciary duty cause of action, and argued that Attorney Barrett was responsible for pursuing all causes of action, because Attorney Barrett did not dismiss or abandon any of them. They noted that MA3 was in the case until it moved for a directed verdict near the close of trial, and that Reeves did not prevail on the final causes of action in the cross-complaint until after he had prevailed before the jury on breach of fiduciary duty.

As to the absence of probable cause, Reeves and MA3 argued that Attorney Barrett, “as an experienced trial attorney and the beneficiary of four years of discovery and a scathing appellate opinion issued against his client, his client’s former counsel, and his own firm, knew, or at least should have[] known[,] that the cross-complaint had no merit before he went to trial.”

On the specific issue of malice, Reeves and MA3 relied on the meritlessness of the cross-complaint and on evidence that Attorney Barrett stymied settlement negotiations for his own firm’s advantage. Reeves’s counsel’s declaration explained that, on the first or second day of trial, Reeves approached Finton to try to work out a settlement directly. Attorney Barrett told Reeves’s counsel that he would not allow Finton to speak directly to Reeves, and any settlement discussions would have to go through Attorney Barrett exclusively. Attorney Barrett conveyed no offers, and Reeves did not try to speak directly with Finton again.

9. Attorney Barrett’s Reply
10.
In reply in support of his anti-SLAPP motion, Attorney Barrett reasserted his earlier arguments. He believed that he had effectively abandoned all causes of action other than breach of fiduciary duty, and to the extent he did not officially dismiss them earlier, he argued that Reeves and MA3 failed to show they were harmed by “a few days of alleged delay before being formally notified of the abandonment.”

He again argued there was probable cause for the breach of fiduciary duty cause of action, and again did not attempt to argue probable cause existed for the other causes of action in the cross-complaint.

As to malice, he argued that the only admissible evidence of his mental state was own declaration. As to the issue of his interference in the parties’ attempt to settle the case directly, he represented that “merely asking that settlement negotiations go through counsel” does not establish ill will.

11. Hearing
12.
A hearing was held on Attorney Barrett’s anti-SLAPP motion. The court issued a tentative opinion denying the motion, but held off on issuing it until the court heard a pending anti-SLAPP motion that had been filed by Attorney Evans – the attorney who had initially filed the cross-complaint. Upon hearing them both, the court took both matters under submission and ultimately denied both motions.

13. Ruling and Appeal
14.
The court denied Attorney Barrett’s anti-SLAPP motion. On the critical issue of whether Reeves and MA3 established a probability of prevailing, the court first held that an attorney – such as Attorney Barrett – can be held liable for malicious prosecution when that attorney did not initiate prosecution of the action, but continued its prosecution. The court held that an attorney associating into a case must take immediate steps to dismiss the meritless claims in the case, and may be liable if he does not. Concluding that Attorney Barrett did not do so, the court believed that all causes of action in the cross-complaint were thus viable bases for the malicious prosecution complaint against Attorney Barrett. The court was not favorably impressed by Attorney Barrett’s simultaneous claim to having “abandoned” those causes of action while also asserting his purported abandonment was not an admission that they lacked probable cause. The court instead inferred that Attorney Barrett “was indifferent to the burden he was imposing on [Reeves and MA3] by failing to dismiss the claims because this required [them] to spend resources preparing and making motions, such as the motion for a judgment, to remove the causes of action that [Attorney] Barrett states he had abandoned.”

The court did not specifically address whether there was or was not probable cause to pursue the breach of fiduciary duty cause of action in the cross-complaint. Instead, it held that there was evidence that Reeves and MA3 “can establish the element of lack of probable cause with regards to a number of the” other causes of action in the cross-complaint.

On the issue of malice, the court concluded that malice could be established by a combination of the lack of probable cause combined with Attorney Barrett’s “indifferen[ce]” toward Reeves and MA3, arising from his failure to affirmatively and promptly dismiss the causes of action he instead chose to silently abandon.

Attorney Barrett filed a timely notice of appeal.

DISCUSSION

As before the trial court, Attorney Barrett’s argument on appeal is based almost exclusively on his belief that the facts establish the existence of probable cause to pursue the breach of fiduciary duty cause of action in the cross-complaint. As to the remaining causes of action, he argues that his “effective dismiss[al]” of those causes of action defeats their use as a basis for malicious prosecution. He suggests that Reeves and MA3 have a mere “quibble regarding the timing of the dismissal/ abandonment of the claims,” and have established no damages arising from the “few days at best” during which they believe he should have, but did not, dismiss those causes of action. Finally, and for the first time, Attorney Barrett adds a brief argument that “[t]he same conduct which supports breach of fiduciary duty supports all of the other causes of action.”

1. Standard of Review
2.
As we have explained, there is no dispute that Attorney Barrett has satisfied his burden under the first prong of the anti-SLAPP statute. Thus, the burden shifted to Reeves and MA3 to demonstrate a probability of prevailing on their malicious prosecution claim. (Zamos v. Stroud, supra, 32 Cal.4th at p. 965.) To satisfy this prong, they must demonstrate that the complaint is legally sufficient and supported by a sufficient prima facie showing of facts to sustain a judgment in their favor if their evidence is credited. (Ibid.) Whether they have established a prima facie case is a question of law. (Ibid.) Our review is therefore de novo. (Cole v. Patricia A. Meyer & Associates, APC (2012) 206 Cal.App.4th 1095, 1105 (Cole).)

When an anti-SLAPP motion is directed toward a complaint containing a single cause of action for malicious prosecution arising out of an underlying multi-count complaint, the plaintiff can satisfy its burden of establishing a prima facie case if it establishes at least one cause of action in the underlying action was maliciously prosecuted. (Cuevas-Martinez v. Sun Salt Sand, Inc. (2019) 35 Cal.App.5th 1109, 1119.) Our review may be similarly limited; as long as we conclude one cause of action in the underlying cross-complaint was pursued by Attorney Barrett without probable cause and with malice, the malicious prosecution cause of action can proceed and the anti-SLAPP motion would have been properly denied. (Id. at p. 1119 & fn. 3.)

3. There is Prima Facie Evidence of Malicious Prosecution
4.
Preliminarily, the complaint is legally adequate. A malicious prosecution cause of action can be based on maliciously filing a cross-complaint. (Zamos v. Stroud, supra, 32 Cal.4th at pp. 968–969.) Moreover, it may be directed at only part of an underlying action. “A claim for malicious prosecution may . . . apply to a defendant who has brought an action charging multiple grounds of liability when some, but not all, of the grounds were asserted without probable cause and with malice. [Citations.]” (Sycamore Ridge Apartments LLC v. Naumann (2007) 157 Cal.App.4th 1385, 1399 (Sycamore Ridge).)

Before we consider the evidence supporting the elements of probable cause and malice, we first discuss the law of malicious prosecution as it applies to a lawyer substituting or associating into a litigation and the obligations imposed on that attorney.

A. Malicious Prosecution for Continuing to Prosecute a Meritless Case
B.
In Zamos v. Stroud, supra, 32 Cal.4th at page 960, the California Supreme Court held that “an attorney may be held liable for continuing to prosecute a lawsuit discovered to lack probable cause.” This is because “[c]ontinuing an action one discovers to be baseless harms the defendant and burdens the court system just as much as initiating an action known to be baseless from the outset. [Citation.]” (Id. at p. 969.) An attorney will be liable “only for the damages incurred from the time the attorney reasonably should have caused the dismissal of the lawsuit after learning it has no merit.” (Id. at p. 970.) Therefore, “an attorney can avoid liability by promptly causing the dismissal of, or withdrawing as attorney in, the lawsuit.” (Ibid.)

How this rule applies to an attorney associating into a pending case was discussed by Sycamore Ridge, supra, 157 Cal.App.4th at p. 1385. In that case, the initial attorneys brought suit against a landlord on behalf of dozens of tenants and former tenants. The landlord’s malicious prosecution action was based on the fact that one of the many plaintiffs/former-tenants should not have been included in the lawsuit, or, at least, not in all of the causes of action in which she was a named plaintiff. (Id. at p. 1391.) While the one plaintiff in question had initially answered a questionnaire suggesting that she had some viable claims, her later interrogatory responses established that there was no probable cause for her to be included in many causes of action. (Id. at pp. 1393–1394, 1405.) Eventually, she instructed her counsel to dismiss her claim without prejudice. Thereafter, opposing counsel offered to waive costs if she dismissed with prejudice; the plaintiff agreed. (Id. at pp. 1394–1395.)

A second law firm had associated as counsel on behalf of plaintiffs prior to the challenged plaintiff’s dismissal, and had no contact with her. (Sycamore Ridge, supra, 157 Cal.App.4th at p. 1395.) The issue raised by the Sycamore Ridge appeal was whether the landlord had a malicious prosecution action against the second law firm under these circumstances. The trial court granted that law firm’s anti-SLAPP motion, on the basis that there was no evidence that the firm had participated in prosecuting the challenged plaintiff’s action, given that the firm had joined the case only two months before her case was dismissed and nine days after she had asked for it to be dismissed. (Id. at pp. 1395–1396.) The Court of Appeal reversed. It explained, “Before agreeing to become attorney of record in a pending case, an attorney should, at a minimum, be familiar with the client’s claims and should have made a preliminary determination whether probable cause exists to support the asserted claims or defenses. By associating into the case as cocounsel, the [second firm] became the proponents of all of [the challenged plaintiff’s] claims, which included a large number of claims that were untenable on their face. The [attorneys] thus either knew or should have known of the significant deficiencies in [the plaintiff’s] claims at the time they associated into the case, and there is no evidence indicating that the [second firm] took immediate steps to dismiss the meritless claims upon associating into the case.” (Id. at p. 1407.)

Applied to this case, we focus our attention on Attorney Barrett’s conduct when he joined the prosecution of the cross-complaint a few weeks before trial. Although Attorney Barrett claims to have decided, shortly after he became involved, to narrow the cross-complaint to a single cause of action against Reeves, he did not take immediate steps to dismiss MA3 or the other eight non-breach-of-fiduciary-duty causes of action alleged against Reeves.

C. There is Prima Facie Evidence of Lack of Probable Cause
D.
The element of lack of probable cause “requires the trial court to make an objective call as to the reasonableness of the defendant’s conduct; that is, to determine whether, on the facts known to defendant, institution of the prior action was legally tenable. If the prior action was objectively reasonable, the malicious prosecution claim will fail. [Citation.]” (Sierra Club Foundation v. Graham (1999) 72 Cal.App.4th 1135, 1153.) “Probable cause does not depend on the defendant’s subjective evaluation of the legal merits of the prior action. But if defendant knows that the facts he or she is asserting are not true, then defendant’s knowledge of facts which would justify initiating suit is zero, and probable cause is nonexistent. ‘A litigant will lack probable cause for his action either if he relies upon facts which he has no reasonable cause to believe to be true, or if he seeks recovery upon a legal theory which is untenable under the facts known to him.’ [Citation.]” (Id. at pp. 1153–1154.) “The question of probable cause is one of law, but if there is a dispute concerning the defendant’s knowledge of facts on which his or her claim is based, the jury must resolve that threshold question. It is then for the court to decide whether the state of defendant’s knowledge constitutes an absence of probable cause. [Citations.]” (Id. at p. 1154.)

While Attorney Barrett spends the bulk of his brief arguing probable cause existed for pursuit of the breach of fiduciary duty cause of action, he gives short attention to the remaining causes of action. The lack of probable cause to pursue several of the other claims is apparent.

We take, as just one example, the sixth cause of action, for violation of the Uniform Trade Secrets Act (UTSA). The Act defines a trade secret as “information, including a formula, pattern, compilation, program, device, method, technique, or process, that: [¶] (1) Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and [¶] (2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” (Civ. Code, § 3426.1, subd. (d).) At Finton’s deposition in June 2013 – three years prior to trial – Finton was asked to identify the trade secrets he claimed were taken by Reeves; he identified only non-confidential documents such as subcontractor agreements on pending jobs. At no point did Finton or FCI identify any document taken by Reeves which was subject to sufficient efforts related to secrecy such that it could arguably be claimed to be entitled to trade secret protection. By the time Attorney Barrett became involved, the case had been pending for years, and no discovery – no review of the documents taken by Reeves and the other employees who left, and no deposition of Finton or Tontini – had ever come close to identifying a trade secret subject to the Act. The UTSA cause of action was meritless; and Attorney Barrett did nothing to unilaterally dismiss it – waiting instead for Reeves to pursue his motion in limine on the first day of jury selection to withdraw his firm’s previously-filed opposition.

On appeal, Attorney Barrett’s argument that he did possess probable cause to pursue this cause of action consists of the sentence: “The same conduct which supports breach of fiduciary duty supports all of the other causes of action,” and a citation to a case identifying the elements of a cause of action for misappropriation of a trade secret. In his reply brief, and at oral argument, he explained that the trade secret cause of action is based on Reeves and some of the employees who left with him downloading copies of client files, purportedly containing, “proprietary documents, including contract forms, sample requests for proposals, accounting sheets, budgets, and subcontractor lists.” Notably absent from Attorney Barrett’s argument is any identification of a trade secret supposedly meeting the statutory definition; specifically, Attorney Barrett never attempted to argue the alleged “proprietary” information was subject to reasonable efforts to maintain its secrecy.

While a lack of probable cause to pursue a single cause of action in the underlying cross-complaint is a sufficient basis on which to support the malicious prosecution cause of action in this case, we note that Attorney Barrett’s superficial analysis of probable cause with respect to every cause of action other than breach of fiduciary duty can be perceived as a concession of lack of probable cause. Indeed, particularly egregious is Attorney Barrett’s appellate argument that “[t]he equitable claims for quantum meruit [and] indemnity . . . also arise out of the same basic facts [as breach of fiduciary duty].” The cross-complaint’s causes of action for quantum meruit and indemnity were based on the Mills litigation, not the circumstances of Reeves’s exit from FCI and formation of MA3. In other words, to the extent Attorney Barrett argues there was probable cause for his continued pursuit of these two causes of action, his argument is based entirely on a mischaracterization of the pleading with respect to those causes of action.

We therefore conclude there is sufficient evidence of lack of probable cause for Attorney Barrett’s continued pursuit of at least three causes of action, which is sufficient to defeat the anti-SLAPP motion on this element. (Cuevas-Martinez v. Sun Salt Sand, Inc., supra, 35 Cal.App.5th at p. 1119.)

We need not fully address the issue of probable cause to support the breach of fiduciary duty cause of action. On the current record, probable cause to pursue breach of fiduciary duty may be a closer question. Preliminarily, the trial court’s denial of Reeves’s motion for a directed verdict on the cause of action does not establish probable cause as a matter of law. To be sure, the interim adverse judgment rule provides that probable cause is established if an action succeeds after a hearing on the merits, even if it is later overturned by a subsequent ruling. (Parrish v. Latham & Watkins (2017) 3 Cal.5th 767, 771.) But that rule applies only to rulings on the merits, not on technical or procedural grounds. (Id. at p. 778.) When the basis for the court’s ruling cannot be determined – as in this case – the interim adverse judgment rule does not apply. (Wilson v. Parker, Covert & Chidester (2002) 28 Cal.4th 811, 823–824, superseded by statute on other grounds.) Turning to the facts themselves, it is apparent that some of the facts on which Attorney Barrett purports to rely are untrue, and were known to be untrue to Attorney Barrett when he pursued the cross-complaint. For example, even though MA3 was incorporated on February 13, 2012, Attorney Barrett relies on certain invoices sent by subcontractors to MA3 which were dated as early as 2011, in order to impliedly argue that Reeves had been secretly planning to form MA3 to compete with FCI for months. But documents turned over into discovery revealed that these invoices had actually been sent to FCI in 2011. After the clients moved their jobs to MA3, the subcontractors reissued the unpaid invoices, and sent them to the new contractor, MA3. This was not a simple factual dispute for the jury to resolve; the paper trail (including the initial invoices to FCI in the same amounts) conclusively established that the invoices to MA3 were not generated prior to MA3’s incorporation in February 2012. At the time he brought the breach of fiduciary duty cause of action to trial, Attorney Barrett had no probable cause to believe Reeves established MA3 in 2011, and his continued reliance on the evidence purporting to support this fact is consistent with Reeves’s position that Barrett was overstating his evidence and acted with malice.

E. There is Prima Facie Evidence of Malice
F.
“The malice element of malicious prosecution goes to the defendants’ subjective intent for instituting the prior case. [Citation.] Malice does not require that the defendants harbor actual ill will toward the plaintiff in the malicious prosecution case, and liability attaches to attitudes that range ‘ “from open hostility to indifference. [Citations.]” ’ [Citation.] Malice may be inferred from circumstantial evidence, such as the defendants’ lack of probable cause, supplemented with proof that the prior case was instituted largely for an improper purpose. [Citation.] This additional proof may consist of evidence that the prior case was knowingly brought without probable cause or was brought to force a settlement unrelated to its merits. [Citation.]” (Cole v. supra, 206 Cal.App.4th at pp. 1113–1114.)

Malice is not established by a mere absence of probable cause; but by a knowing lack of probable cause. (Cole, supra, 206 Cal.App.4th at p. 1114.) The extent of an attorney’s investigation and research may be relevant to whether the attorney acted with malice. (Daniels v. Robbins (2010) 182 Cal.App.4th 204, 224–225 (Daniels).) In the context of an attorney being sued for associating in a meritless litigation and failing to immediately dismiss it, malice is established when the absence of probable cause was combined with counsel’s awareness of facts proving the claims untenable or counsel’s failure to adequately familiarize himself with the case before associating in. (Sycamore Ridge, supra, 157 Cal.App.4th at p. 1409.) “Attorneys may . . . avoid liability if they refrain from lending their names to pleadings or motions about which they know next to nothing.” (Cole, supra, 206 Cal.App.4th at p. 1119.)

Here, there is evidence that Attorney Barrett failed to conduct any investigation prior to agreeing to try the cross-complaint. Language in his appellate briefing seems to concede the point. When Attorney Barrett is rhetorically asking at what time Reeves believes Attorney Barrett should have dismissed the untenable trade secrets cause of action, Attorney Barrett asks if it should have been, “Three weeks earlier, when he first agreed [to] try the [c]ross-complaint and was just commencing his review of the file?” Attorney Barrett argues that his failure to familiarize himself with the case before agreeing to try it was reasonable because “the lawsuit was worked up for years by competent counsel before” he stepped in. This is not the law, and, in any event, the argument would be somewhat more persuasive had the Court of Appeal not chastened the client and prior counsel for overzealously prosecuting a related lawsuit which indisputably lacked merit.

At the time Attorney Barrett came into the case, a reasonable review of the record would have revealed the following: Finton, not Reeves, had been committing financial improprieties and stealing millions from FCI, in breach of his fiduciary duties; Finton and FCI, represented by Attorney Evans, brought a number of meritless causes of action against Reeves and MA3 for improper purposes – including causing harm to Reeves’s nascent business; Finton and FCI, represented by Attorney Evans, went so far as to sue Reeves’s counsel, in a meritless and improper litigation; after the Layfield Firm came into the representation in 2014, it did not dismiss the meritless causes of action against Reeves and MA3. The evidence supports the conclusion that it should have been apparent to any reasonable attorney in Attorney Barrett’s position that, even if a viable cause of action for breach of fiduciary duty existed, several of the other causes of action were not supported by probable cause, and the only appropriate response would be their immediate dismissal. Either Attorney Barrett conducted this investigation and knew these facts, or he intentionally blinded himself to these facts, choosing instead to narrow his review of the record to only those facts which would assist his presentation of his case, as limited to the three days prior to Reeves’s departure from FCI.

Attorney Barrett took no affirmative steps to dismiss the meritless causes of action; instead, he waited for Reeves and MA3 to go to the time and expense of seeking dismissal themselves. There was also some evidence that Attorney Barrett intentionally blocked settlement negotiations. The entire record establishes a prima facie case of malice.

G. Reeves and MA3 Need Not Establish the Exact Amount of Damages at This Stage
H.
Throughout Attorney Barrett’s argument is the theory that keeping the meritless causes of action alive for a few weeks caused Reeves and MA3 minimal harm. But Reeves and MA3 need not establish damages at this stage. “In order to be granted monetary relief, a malicious prosecution plaintiff must also prove damages. However, there is no requirement that, for purposes of surviving an anti-SLAPP motion, a malicious prosecution plaintiff must provide specific evidence of the extent of the damages suffered. A malicious prosecution claim is actionable precisely because the malicious prosecution is presumed to have injured the defendant in the underlying action . . . .” (Sycamore Ridge, supra, 157 Cal.App.4th at pp. 1411–1412.)

Sycamore Ridge also explained the harm caused by an attorney’s failure to immediately dismiss meritless causes of action. “The [defendant attorneys]’ associating into the case without disclosing to [the underlying defendant] an intention to dismiss [the plaintiff’s meritless] claims relayed the message to [the underlying defendant] that not only would prosecution of the case continue, but that the case would now be prosecuted by additional attorneys who were coming into the litigation for their expertise. [¶] Maintaining a case one knows, or should know, is untenable continues to harm the defendant as long as the case remains open, since the defendant must continue to prepare a defense to the case as long as the case appears to be moving forward. An attorney who associates into a case that is being maliciously prosecuted participates in harming the defendant for the time period that the attorney allows the untenable claims to remain alive.” (Sycamore Ridge, supra, 157 Cal.App.4th at p. 1410.)

DISPOSITION

The order denying Attorney Barrett’s anti-SLAPP motion is affirmed. Reeves and MA3 shall recover their costs on appeal.

RUBIN, P. J.

We concur:

MOOR, J.

KIM, J.