Judge Rolf M. Treu
Department 58
Hearing Date: Friday, March 21, 2014

Calendar No.: 17
Case Name: Christiansen, et al. v. Gross, et al.
Case No.: BC527182 (r/t BC420456)
Motion: (1) Demurrers
(2) Special Motions to Strike
Moving Party: (1) (a) Defendant Jerry Gross
(b) Defendant TELACU Industries, Inc.
(2) (a) Defendants Quinn Emanuel Urquhart & Sullivan, LLP; Steven G. Madison; and Michael T. Lifrak
(b) Defendants Dannis Woliver Kelley, Sue Ann Salmon Evans, Brian Duus, and Marilyn J. Cleveland
(c) Defendants Brian Goldberg, Myra Lurie, Myra Demeter, and Lisa Korbatov
Responding Party: (1)-(2) Plaintiffs Karen Christiansen and Strategic Concepts, LLC

Calendar No.: 18
Case Name: Strategic Concepts, LLC, et al. v. Beverly Hills Unified School District
Case No.: BC420456 (c/w BC420811)
Motion: (3) Motion for Judgment on the Pleadings
Moving Party: (3) Cross-Defendants Strategic Concepts, LLC and Karen Christiansen
Responding Party: (3) Cross-Complainant Beverly Hills Unified School District

Notice: OK

Tentative Ruling: (1) Demurrers are sustained without leave to amend.

(2) Special motions to strike are granted.

(3) Motion for judgment on the pleadings is denied.

I. BACKGROUND

1. BC420456
On 8/25/09, Strategic Concepts, LLC and Karen Christiansen (collectively “Plaintiffs”) filed an action (BC420456) against Beverly Hills Unified School District (“BHUSD”) arising out of the provision of program and project management services pursuant to contracts, which BHUSD concluded were void pursuant to Gov’t Code § 1090 and other public contracting laws. The operative Third Amended Complaint was filed on 4/26/10 and asserts causes of action for declaratory relief and breach of contract.

On 12/14/09, BHUSD filed a cross-complaint against Plaintiffs, alleging that the contracts are void and unenforceable. BHUSD asserts causes of action for violations of (1) Gov’t Code § 1090, (2) Gov’t Code § 12650, (3) Education Code § 17604, (4) Gov’t Code § 4525, (5) Education Code § 17596, (6) breach of contract, (7) constructive trust, (8) unjust enrichment, (9) declaratory relief, and (10) common counts – money had and received.

2. BC527182
On 11/8/13, Plaintiffs filed an action (BC527182) against Jerry Gross; TELACU Industries, Inc.; Brian Goldberg, Myra Lurie, Myra Demeter, and Lisa Korbatov (collectively “Board Members”); Dannis Woliver Kelley, Sue Ann Salmon Evans, Brian Duus, and Marilyn J. Cleveland (collectively “DWK Attorneys”); and Quinn Emanuel Urquhart & Sullivan, LLP, Steven G. Madison, and Michael T. Lifrak (collectively “Quinn Emanuel Attorneys”) : collectively, all the defendants in the BC527182 will be referred to as “Defendants.” BC527182 arises out of the repudiation of the contracts and the initiation and Defendants’ participation in the criminal prosecution by the District Attorney’s Office against Christiansen which resulted in convictions for violations of Gov’t Code §§ 1090 and 1097, which convictions were reversed by the Court of Appeal (People v. Christiansen (2013) 216 Cal.App.4th 1181). BC527182 asserts causes of action for fraud and malicious prosecution: the malicious prosecution claims is brought by Christiansen against DWK Attorneys and Quinn Emanuel Attorneys only.

3. Procedural History
On 8/28/09, BHUSD filed an action (BC420811) against Plaintiffs asserting all of the COAs in BHUSD’s cross-complaint in BC420456 except the 10th COA for common counts. On 10/23/09, Plaintiffs filed a First Amended Cross-Complaint for damages against BHUSD arising out of BHUSD’s repudiation of the contracts.

On 9/21/09, the Court found BC420811 related to BC420456. On 11/10/09, the parties stipulated to consolidation of BC420811 and BC420456 for all purposes. Beginning in December 2010, BC420811 and BC420456 were stayed as a result of the criminal prosecution of Christiansen. These matters were assigned to this Court on 8/3/12. On 12/6/13, the Court found BC527182 related to BC420456. Trial is set for BC420456 for 4/28/14; FSC for 4/10/14.

II. BC527182

1. Factual Allegations
Christiansen is the owner, manager, and principal of Strategic Concepts. ¶ 1. From 2004 to June 2006, Christiansen was employed by the BHUSD: in June 2006, Christiansen’s employment was terminated by mutual agreement, and Plaintiffs entered into an agreement to provide services to BHUSD as independent contractors. ¶ 7. On 6/3/08, BHUSD entered into an agreement with Strategic Concepts to provide consulting services in connection with construction and renovations, which included Christiansen providing personal services. ¶ 8. On 8/6/08, an amendment to the 6/3/08 agreement was made whereby Plaintiffs would provide program and project management services for further construction and renovations. ¶¶ 10-12.

On 8/13/09, Plaintiffs received a letter from Marilyn Cleveland, of DWK Attorneys and claiming to represent BHUSD, which asserted that her firm had concluded that the 6/3/08 agreement and 8/6/08 amendment were void under Gov’t Code § 1090 and demanded disgorgement and repayment of all previous amounts paid by BHUSD to Plaintiffs. ¶ 17; see also ¶¶ 9, 13 (payments received from BHUSD for services provided by Plaintiffs pursuant to the 2008 agreements). However, Christiansen was not an officer, member, or an employee of BHUSD when the 2008 agreements were made. ¶ 20.

In August 2009, Plaintiffs and BHUSD sued each other in BC420456 and BC420811, in which BHUSD was represented by DWK Attorneys. ¶ 21. In July 2010, Defendants began a secret campaign to persuade the public integrity division of the Los Angeles County District Attorney’s office to institute a criminal prosecution of Christiansen. ¶ 22. In October 2010, Quinn Emanuel Attorneys were substituted as counsel for BHUSD. ¶ 23.

On 11/10/10, Gross – superintendent of BHUSD (¶ 3) – testified in his deposition that he was employed by TELACU – a competitor of Plaintiffs – since 2005 and that he discussed Plaintiffs’ 2008 agreements with BHUSD with an officer of TELACU in Summer 2009 and thereafter arranged for DWK Attorneys to represent BHUSD in voiding Plaintiffs’ 2008 agreements. ¶ 24. After Plaintiffs’ 2008 agreements were voided, TELACU applied to BHUSD to take over management of the construction projects, was chosen as one of the finalists with Gross’ endorsement, but later withdrew its application. ¶ 25. Gross testified that he did not disclose to BHUSD his relationship with TELACU when BHUSD sought to void Plaintiffs’ 2008 agreements or when TELACU was selected as a finalist to replace Plaintiffs. ¶ 27.

In December 2010, a criminal information was filed against Christiansen charging her with violations of Gov’t Code §§ 1090 and 1097. ¶ 32. Throughout the criminal action, Defendants through Quinn Emanuel Attorneys actively provided public support and behind-the-scenes assistance. ¶ 36. Christiansen was convicted (¶ 37); however, the conviction was reversed by the Court of Appeal in May 2013 which then became final (¶ 39). In September 2013, Christiansen’s conviction and sentence was set aside. Id.

2. Demurrer
Gross and TELACU demur to the 1st COA for fraud in BC527182, which is the only claim asserted against them. “The elements of fraud are (1) the defendant made a false representation as to a past or existing material fact; (2) the defendant knew the representation was false at the time it was made; (3) in making the representation, the defendant intended to deceive the plaintiff; (4) the plaintiff justifiably relied on the representation; and (5) the plaintiff suffered resulting damages.” West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 792. Fraud must be pled with specificity “showing how, when, where, to whom, and by what means the representations were made, and, in the case of a corporate defendant, the plaintiff must allege the names of the persons who made the representations, their authority to speak on behalf of the corporation, to whom they spoke, what they said or wrote, and when the representation was made.” Id. at 793.

a. Specificity
Gross and TELACU argue that Plaintiffs fail to allege facts with specificity as to any misrepresentations, Plaintiffs’ reliance, or Plaintiffs’ resulting damages. The Court agrees. Plaintiffs’ fraud claim appears to be based on conduct taken to void Plaintiffs’ 2008 agreements and in connection with the criminal prosecution of Christiansen. Complaint ¶ 41. However, Plaintiffs fail to identify any misrepresentations made by Gross and TELACU. Cf. Complaint ¶ 20 (alleging only a dispute as to whether a “de facto employee” could violate Gov’t Code §§ 1090 or 1097). Additionally, Plaintiffs fail to allege facts as to any reliance on representations by Gross and TELACU.

Plaintiffs argue in opposition that a fraud claim may be maintained where the misrepresentations were made to third parties. Fraud generally can be based on misrepresentations made to a group of persons which include Plaintiffs or to other persons with the intent or reasonable expectation that it would be repeated to Plaintiffs. CACI 1906. Additionally, the Supreme Court has permitted fraud claims based on letters of recommendation that contained affirmative representations or false information upon which the recipients of the letters reasonably relied. Randi W. v. Muroc Joint Unified School Dist. (1997) 14 Cal.4th 1066, 1075-86. However, Plaintiffs fail to allege any facts of indirect misrepresentations by Gross and TELACU.

The Court notes that Plaintiffs also cite to Dawson v. Martin (1957) 150 Cal.App.2d 379, 383, in support of misrepresentations to third parties. However, Dawson is inapposite because it concerned a malicious prosecution claim arising out of affirmative misstatements made in a sworn complaint. Plaintiffs fail to allege any similar facts or claims against Gross and TELACU.

b. Statute of Limitations
Plaintiffs allege that they became aware of Gross and TELACU’s scheme on 11/10/10. Complaint ¶ 28. Plaintiffs’ BC527182 action was filed on 11/8/13. TELACU separately argues that Plaintiffs’ fraud claim is barred by the three-year statute of limitations. CCP § 338. In connection with this argument, TELACU requests judicial notice of a newspaper article published on 10/16/09 and excerpts of a deposition taken on 11/1/0 in BC420456. The RJN is granted.

The Court notes that TELACU’s RJN establishes, at most, only knowledge of the relationship between Gross and TELACU. However, because Plaintiffs fail to allege facts with specificity as to the misrepresentations by Gross and TELACU, the Court cannot determine whether Plaintiffs’ fraud claim is barred by the statute of limitations based to the extent based on knowledge of the relationship between Gross and TELACU.

c. Ruling
Therefore, the demurrers by Gross and TELACU are sustained as to the 1st COA for fraud in BC527182 based on the failure to allege facts with specificity. Plaintiffs’ opposition failed to request leave to amend and otherwise failed to indicate how they might successfully amend if given the opportunity. Therefore, the Court is inclined to deny leave to amend.

3. Special Motions to Strike
Board Members, DWK Attorneys, and Quinn Emmanuel Attorneys have filed special motions to strike pursuant to CCP § 425.16 as to the Complaint in BC527182.

“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. If the court finds that such a showing has been made, it then determines whether the plaintiff has demonstrated a probability of prevailing on the claim.” Brenton v. Metabolife International Inc. (2004) 116 Cal.App.4th 679, 684.

“To prevail on an anti-SLAPP motion, the movant must first make ‘a threshold showing the challenged cause of action’ arises from an act in furtherance of the right of petition or free speech in connection with a public issue.” Varian Medical Systems, Inc. v. Delfino (2005) 35 Cal.4th 180, 192. “The phrase ‘arising from’ means the defendant’s act underlying the plaintiff’s cause of action must itself have been an act in furtherance of the right of petition or free speech.” City of Cotati v. Cashman (2002) 29 Cal.4th 69, 67.

The second step on an anti-SLAPP motion is a shift of the burden to the plaintiff to present admissible evidence that supports a prima facie case, much like the burden on a motion for summary judgment or directed verdict. CCP § 425.16(b)(1); Taus v. Loftus (2007) 40 Cal.4th 683, 714.

a. Requests for Judicial Notice
The Court notes that Board Members’ cite to a RJN (Board Members’ Mot’n p. 7:19-26): however, no RJN was received or filed by Board Members. Nevertheless, it appears that Board Members RJN only concerned the procedural history of the parties’ actions which is judicially noticeable.

DWK Attorneys request judicial notice of various hearing transcripts, filings, and orders in the criminal action against Christiansen; as well as the Complaint in BC420811. The RJN is granted.

Quinn Emmanuel Attorneys request judicial notice of various hearing transcripts, filings, and orders in the criminal action against Christiansen (RJN); as well as the Court’s 6/16/10 ruling on a motion for judgment on the pleadings in BC420456 (Reply RJN). The RJNs are granted.

b. Board Members
Preliminarily, the Court notes that Plaintiffs clarify that only the 1st COA for fraud is being asserted against Board Members. Opp’n [SLAPP] p. 2:7-15. Therefore, the Court only addresses Board Members’ special motion to strike as directed to the 1st COA for fraud.

i. Protected Activity
Plaintiffs’ fraud claim appears to be based on conduct taken to void Plaintiffs’ 2008 agreements and in connection with the criminal prosecution of Christiansen. Complaint ¶ 41. Board Members argue that the fraud claim arises from protected activity as pre-litigation and litigation conduct. Malin v. Singer (2013) 217 Cal.App.4th 1283, 1299-1300. The Court agrees.

The Court notes that Plaintiffs assert without any citation to authority that the conduct taken to void Plaintiffs’ 2008 agreements was not protected activity. Opp’n [SLAPP] p. 4:18-23. Even if Plaintiffs’ fraud claim includes certain unprotected activity, the Court notes that the principal thrust or gravamen (see City of Colton v. Singletary (2012) 206 Cal.App.4th 751, 767; Raining Data Corp. v. Barrenechea (2009) 175 Cal.App.4th 1363, 1368-69) of the fraud claim is based on pre-litigation and litigation conduct. Therefore, Board Members establish that the fraud claim arises out of protected activity.

ii. Probability of Prevailing
Similar to the demurrers by Gross and TELACU, Board Members argue that Plaintiffs fail to allege any misrepresentations by them or reliance thereon. Plaintiffs not only fail to address this argument but also fail to submit any evidence that might support a fraud claim against Board Members.

The Court notes that Board Members also argue that they are immune from the fraud claim pursuant to Gov’t Code §§ 821.6 and 820.2. However, Gov’t Code § 821.6 is intended to protect public employees from liability for malicious prosecution. Tur v. City of Los Angeles (1996) 51 Cal.App.4th 897, 901. While Gov’t Code § 820.2 may apply (see Caldwell v. Montoya (1995) 10 Cal.4th 972, 980-82), the Court cannot make a determination that Plaintiffs’ fraud claim against Board Members is based on discretionary acts because of Plaintiffs’ failure to allege or present any evidence concerning the Board Members’ conduct.

iii. Ruling
Therefore, the Board Members’ special motion to strike is granted.

c. DWK Attorneys and Quinn Emanuel Attorneys
The motions by DWK Attorneys and Quinn Emanuel Attorneys (collectively “Attorney Parties”) raise substantively identical issues.

i. Evidentiary Objections
Attorney Parties object to portions of the declarations of Karen A. Christiansen and Hillel Chodos: all objections are sustained.

ii. Protected Activity
Plaintiffs’ fraud claim appears to be based on conduct taken to void Plaintiffs’ 2008 agreements and in connection with the criminal prosecution of Christiansen. Complaint ¶ 41. Plaintiffs’ malicious prosecution claim is based on the criminal prosecution of Christiansen. Id. ¶ 44.

Attorney Parties argue that Plaintiffs’ claims all arise out of protected activity. The Court agrees. To the extent Plaintiffs’ claims are based on Attorney Parties’ participation in the criminal prosecution of Christiansen, this constitutes protected activity. Dickens v. Provident Life and Acc. Ins. Co. (2004) 117 Cal.App.4th 705, 716. To the extent Plaintiffs’ claims are based on Attorney Parties’ conduct taken to void Plaintiffs’ 2008 agreements, this concerns pre-litigation and litigation conduct. See Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th 1106, 1115.

iii. Probability of Prevailing – Malicious Prosecution
In order to state a cause of action for malicious prosecution, a plaintiff must establish that the prior action (1) was commenced by or at the direction of the defendant and was pursued to a legal termination in plaintiff’s favor; (2) was brought without probable cause; and (3) was initiated with malice. Sheldon Appel Co. v. Albert & Oliker (1989) 47 Cal.3d 863, 871.

Attorney Parties argue that Plaintiffs cannot establish the probable cause element. The Court agrees. Probable cause concerns whether the prior action was legally tenable as an objective matter. See, e.g., Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 292. This is viewed under an objective standard as whether any reasonable attorney would have though the claim to be tenable. Antounian v. Louis Vuitton Malletier (2010) 189 Cal.App.4th 438, 448-49.

The conviction of Christiansen, although later reversed on appeal on a legal issue (People v. Christiansen, 216 Cal.App.4th at 1189-90 (declining to apply the broad interpretation of Gov’t Code § 1090 in civil appellate cases for purposes of criminal prosecution)), conclusively establishes probable cause in the criminal prosecution of Christiansen based on the interim adverse judgment rule. Antounian, 189 Cal.App.4th at 450-5. This is further supported by the additional interim rulings during the criminal prosecution of Christiansen that allowed the criminal prosecution to proceed and the investigations of the prosecutor. See Attorney Parties’ RJNs.

To the extent Plaintiffs argue that the fraud exception applies (Antounian, 189 Cal.App.4th at 451; Wilson v. Parker, Covert & Chidester (2002) 28 Cal.4th 811, 817 (fraud or perjury)), Plaintiffs fail to submit admissible evidence to support their assertions. Plaintiffs’ counsel’s declaration (Chodos Decl. ¶¶ 9-10) largely relates to only the correctness of the trial court’s exclusion of evidence, instructions, and interpretation of law. To the extent Plaintiffs assert that false testimony was offered (Opp’n p. 11:9-12), no evidence was submitted to support this and Attorney Parties dispute Plaintiffs’ characterization (see Quinn Emanuel Attorneys’ Reply p. 6:15-27 (and citations therein)).

iv. Probability of Prevailing – Fraud
Preliminarily, the Court notes that Plaintiffs fraud claim against the Quinn Emanuel Attorneys appears to be based entirely on Quinn Emanuel Attorneys’ participation in the criminal prosecution of Christiansen because they were substituted in as counsel after Plaintiffs’ 2008 agreements were voided and the civil actions instituted. See Complaint ¶ 23. Therefore, as to the Quinn Emanuel Attorneys, the 1st COA for fraud does not raise any different issues than the 2nd COA for malicious prosecution. See Pac. Gas & Electric Co. v. Bear Stearns & Co. (1990) 50 Cal.3d 1118, 1130-31.

As to the DWK Attorneys, to the extent the fraud claim concerns conduct apart from the criminal prosecution of Christiansen, DWK Attorneys correctly note that, similar to the demurrers by Gross and TELACU, Plaintiffs fail to allege any misrepresentations by them or reliance thereon. Plaintiffs not only fail to address this argument but also fail to submit any evidence that might support a fraud claim against DWK Attorneys.

Additionally, DWK Attorneys also correctly note that to the extent Plaintiffs’ fraud claim is based on its 8/13/09 letter and subsequent conduct in the civil actions to void Plaintiffs’ 2008 agreements, Plaintiffs’ claim is barred by the litigation privilege. See Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1057-58; Hagberg v. Cal. Federal Bank FSB (2004) 32 Cal.4th 350, 361.

v. Ruling
Therefore, the special motions to strike by DWK Attorneys and Quinn Emanuel Attorneys are granted.

III. BC420456
Plaintiffs move for judgment on the pleadings as to the cross-complaint filed by BHUSD in BC420456 and BHUSD’s complaint filed in BC420811.

1. Factual Allegations
BHUSD’s pleadings allege that Christiansen was an employee of BHUSD at all times during the negotiation of the 6/1/06 agreement (see, e.g., Cross-Complaint ¶ 9) and that Christiansen continued as a de facto employee of BHUSD after the 6/1/06 agreement during which she participated and influenced the decision to enter into the 2008 agreements (id. ¶¶ 10-15).

2. Requests for Judicial Notice
Plaintiffs request judicial notice of People v. Christiansen (2013) 216 Cal.App.4th 1181, and a letter sent from BHUSD’s counsel to the District Attorney requesting the institution of criminal proceedings. BHUSD requests judicial notice of filings and orders in the criminal action against Christiansen and in BC420456, various regulations of BHUSD, and the legislative analysis of a bill to amend Gov’t Code § 1092. The RJNs are granted.

3. Gov’t Code § 1090

a. Independent Contractor
Plaintiffs argue that Gov’t Code § 1090 does not apply. However, Plaintiffs’ argument is based entirely on the analysis in People v. Christiansen (2013) 216 Cal.App.4th at 1189-90, in which the Court of Appeal declined to apply a more broad interpretation of Gov’t Code § 1090 as done by other Courts of Appeal in Cal. Housing Finance Agency v. Hanover/Cal. Management and Accounting Center, Inc. (2007) 148 Cal.App.4th 682, 693, and Hub City Solid Waste Services, Inc. v. City of Compton (2010) 186 Cal.App.4th 1114, 1124-25.

Whatever criticisms the Court of Appeal may have raised as to the conclusions in Cal. Housing Finance Agency and Hub City, the Court of Appeal expressly noted that it was rendering no opinion as to the soundness of those opinions in the civil context. People v. Christiansen (2013) 216 Cal.App.4th at 1189. Therefore, the conclusions in Cal. Housing Finance Agency and Hub City continue to bind this Court, which supports BHUSD’s Gov’t Code § 1090 claims.

b. Statute of Limitations
Plaintiffs argue that the statute of limitations bars BHUSD’s Gov’t Code § 1090 claim as to the 2006 agreement, relying on Brandenburg v. Eureka Redevelopment Agency (2007) 152 Cal.App.4th 1350, 1363-65, which imposed a one-year statute of limitations. However, the Court notes that the holding in Brandenburg conflicted with Marin Healthcare Dist. v. Sutter Health (2002) 103 Cal.App.4th 861, 877-78, which imposed a three year statute of limitations. Notably, the legislature has since amended Gov’t Code § 1092 to provide a four year limitations period. BHUSD RJN Ex. G.

However, the Court need not decide whether to follow Brandenburg or Marin because Plaintiffs’ argument does not dispose of the entire cause of action which is also directed at the 2008 agreements which would be timely either under the four year limitations period of Gov’t Code § 1092(b) or even Brandenburg if the Court decided Brandenburg applied.

4. Other Claims
Plaintiffs argue that BHUSD fails to allege facts to support claims under Gov’t Code § 12650, Education Code § 17604, Gov’t Code § 4525, and Education Code § 17596.

BHUSD alleges that the 2006 and 2008 agreements concerned construction management services (see, e.g., Cross-Complaint ¶¶ 9, 12, 14) which supports the applicability of Gov’t Code § 4525. BHUSD alleges that the 2008 amendment contained automatic renewal language (see, e.g., Cross-Complaint ¶ 35) which supports the applicability of Education Code § 17596. BHUSD alleges that the 2006 agreement was not approved or ratified by the BHUSD Board (see, e.g., Cross-Complaint ¶ 28) which supports the applicability of Education Code § 17604. BHUSD alleges that Plaintiffs submitted false records or statements to receive payments (see, e.g., Cross-Complaint ¶ 23) which supports the applicability of Education Code § 12650.

Plaintiffs’ motion simply disputes these factual allegations, which is improper.

5. Ruling
Plaintiffs’ motion for judgment on the pleadings is denied.