Case Name: Haitham Hindi v. John Kevin Crowley, et al.

Case No.: 1-14-CV-261719

Special Motion by Defendants John Kevin Crowley and Crowley & Brereton to Strike the Complaint of Plaintiff Haitham Hindi

Joinder

Defendant Tenenbaum, Crowley & Brereton (“TCB”) filed a joinder to the special motion to strike by defendants John Kevin Crowley and Crowley & Brereton (collectively, “Crowley”). It is generally common practice to permit parties to join in another party’s arguments or motions − other than motions for summary judgment − by stating that the joining party adopts the requests and the points and authorities contained in the joined motion. (See Barak v. The Quisenberry Law Firm (2006) 135 Cal.App.4th 654, 660, 661.) Here, the court finds that TCB has complied with these requirements. Therefore, TCB’s request for joinder is GRANTED.

Request to Conduct Limited Discovery

In opposition, Plaintiff requests an opportunity to conduct limited discovery to determine when Crowley became aware that IPXC did not own the subject intellectual property. “Section 425.16, subdivision (g), however, requires that requests to conduct limited discovery pending a hearing on a special motion to strike must be in the form of a noticed motion.” (Contemporary Services Corp. v. Staff Pro Inc., (2007) 152 Cal.App.4th 1043, 1061 [“Contemporary Services”].) Because Plaintiff failed to satisfy the procedural requirements of section 425.16, subdivision (g) by filing a noticed motion for discovery, his request to conduct limited discovery is DENIED. (Ibid.; see Tuchscher Development Enterprises, Inc. v. San Diego Unified Port Dist. (2003) 106 Cal.App.4th 1219, 1247-1248 [plaintiff’s limited discovery request was not authorized under section 425.16, subdivision (g) because it was not made by noticed motion].)

Evidence

Crowley’s request for judicial notice is GRANTED. (Evid. Code § 452, subd. (d); see Lockley v. Law Office of Cantrell, Green, Pekich, Cruz & McCort (2001) 91 Cal.App.4th 875, 882 [while courts are free to take judicial notice of the existence of each document in a court file, including the truth of results reached, they may not take judicial notice of the truth of hearsay statements in decisions and court files].)

The court SUSTAINS Crowley’s Objection Nos. 1-4 and 7-16, and OVERRULES Objection Nos. 5, 6, and 17. The court OVERRULESS TCB’s Objection No. 1 and SUSTAINS Objection No. 2.

Special Motion to Strike

Crowley moves to strike the malicious prosecution complaint because it arises from protected activity and Plaintiff will not be able to show any probability of success on the merits.

When a special motion to strike is filed, the initial burden rests with defendant to demonstrate that the challenged pleading arises from protected activity. (Code Civ. Proc. § 425.16, subd. (e); Zamos v. Stroud (2004) 32 Cal.4th 958, 965.) Defendant need only make a prima facie showing that the complaint “arises from” constitutionally-protected free speech or petition activity. (See Governor Gray Davis Committee v. American Taxpayers Alliance (2002) 102 Cal.App.4th 449, 458-459.) In determining whether defendant sustained this initial burden of proof, the court relies on the pleadings and declarations or affidavits. (Code Civ. Proc. § 425.16, subd. (b).)

Once defendant makes such a prima facie showing, the burden shifts to the plaintiff to establish a “probability” of prevailing on whatever claims are asserted against defendant. (See Code Civ. Proc. § 425.16, subd. (b).) Plaintiff must demonstrate that the complaint is both legally sufficient and supported by a sufficient prima facie showing of facts to sustain a favorable judgment. (Premier Med. Mgmt. Systems, Inc. v. California Ins. Guar. Ass’n (2006) 136 Cal.App.4th 464, 476.) The burden is on the plaintiff to produce evidence that would be admissible at trial: i.e., to proffer a prima facie showing of facts supporting a judgment in the plaintiff’s favor. (Chavez v. Mendoza (2001) 94 Cal.App.4th 1083, 1087.)

First Prong: Protected Activity

Here, the first step of the inquiry is not disputed. The anti-SLAPP statute defines an “act in furtherance of a person’s right of petition or free speech” to include “any written or oral statement or writing made before a judicial proceeding…” (Code Civ. Proc. § 425.16, subd. (e)(1).) The plain language of the anti-SLAPP statute dictates that every claim of malicious prosecution is a cause of action arising from protected activity because every such claim necessarily depends upon written and oral statements in a prior judicial proceeding. (Daniels v. Robbins (2010) 182 Cal.App.4th 204, 214-215; see Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 734-735.)

As Plaintiff’s complaint alleges a single claim for malicious prosecution, the court finds that the first prong has been satisfied. The burden now shifts to Plaintiff to show a probability of success on the merits of his claim.

Second Prong: Probability of Prevailing on the Merits

“To establish a probability of prevailing, the plaintiff 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. For purposes of this inquiry, the trial court considers the pleadings and evidentiary submissions of both the plaintiff and the defendant; though the court does not weigh the credibility or comparative probative strength of competing evidence, it should grant the motion if, as a matter of law, the defendant’s evidence supporting the motion defeats the plaintiff’s attempt to establish evidentiary support for the claim. In making this assessment it is the court’s responsibility…to accept as true the evidence favorable to the plaintiff…The plaintiff need only establish that his or her claim has minimal merit to avoid being stricken as a SLAPP.” (Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 291 [internal citations and quotation marks omitted].)

As stated above, the complaint alleges a single claim for malicious prosecution. “Malicious prosecution is a disfavored action. This is due to the principles that favor open access to the courts for the redress of grievances. The elements of the malicious prosecution tort have historically been carefully circumscribed so that litigants with potentially valid claims will not be deterred from bringing their claims to court by the prospect of a subsequent malicious prosecution claim. Three elements must be pleaded and proved to establish the tort of malicious prosecution: (1) a lawsuit was commenced by or at the direction of the defendant which was pursued to a legal termination in plaintiff’s favor; (2) the prior lawsuit was brought without probable cause; and (3) the prior lawsuit was initiated with malice.” (Daniels v. Robbins, supra, 182 Cal.App.4th at p. 216.) The court will address each element in turn.

1. Favorable Termination

“The element of favorable termination requires a termination reflecting the merits of the action and plaintiff’s innocence of the misconduct. The theory underlying the requirement of favorable termination is that it tends to indicate the innocence of the accused. Where a proceeding is terminated other than on the merits, the reasons underlying the termination must be examined to see if the termination reflects the opinion of either the court or the prosecuting party that the action would not succeed.” (Pattiz v. Minye (1998) 61 Cal.App.4th 822, 827 [internal citations and quotation marks omitted].)

Here, the underlying action terminated when IPXC voluntarily dismissed its lawsuit against Plaintiff. (See Crowley’s Request for Judicial Notice at Exhibit F.) “The dismissal of an action does not necessarily mean that there has been a favorable termination for purposes of a malicious prosecution action.” (JSJ Limited Partnership v. Mehrban (2012) 205 Cal.App.4th 1512, 1524.) “A voluntary dismissal may be an implicit concession that the dismissing party cannot maintain the action and may constitute a decision on the merits. It is not enough, however, merely to show that the proceeding was dismissed. The reasons for the dismissal of the action must be examined to determine whether the termination reflected on the merits.” (Ibid., citing Robbins v. Blecher (1997) 52 Cal.App.4th 886, 893-894.) Thus, whether the dismissal is a favorable termination for purposes of a malicious prosecution claim depends on whether the dismissal of the underlying action is considered to be on the merits reflecting Plaintiff’s “innocence” of the misconduct alleged.

A technical or procedural termination, as distinguished from a substantive termination, is not favorable for purposes of a malicious prosecution claim. (JSJ Limited Partnership v. Mehrban, supra, 205 Cal.App.4th at p. 1525.) Examples include dismissals (1) on statute of limitations grounds; (2) pursuant to a settlement; (3) on the grounds of laches; (4) for lack of jurisdiction; (5) for being moot; (6) for being premature; and (5) to avoid litigation expenses. (Ibid.)

In support of the motion, attorney Crowley provides his own declaration, under penalty of perjury, stating that he voluntarily dismissed the underlying action because: (1) Plaintiff was no longer able to satisfy any judgment that would be obtained against him because of what he had expended, and would continue to expend, in the protracted litigation (also several motions pending that would be costly to oppose); (2) an ultimate judgment against Plaintiff could be dischargeable in bankruptcy; and (3) the health of Leticia Villegas was suffering from the stress of the litigation. (See Declaration of John Kevin Crowley at ¶ 12.)

In support, Crowley cites two cases: (1) Contemporary Services, supra; and (2) Oprian v. Goldrich, Kest & Associates (1990) 220 Cal.App.3d 337, 345 (“Oprian”). In Contemporary Services, the appellate court stated that the malicious prosecution plaintiffs had not made a sufficient showing that “the dismissal of the complaint in the underlying action reflects their innocence of the misconduct alleged therein.” (Contemporary Services, supra, 152 Cal.App.4th at p. 1057.) In particular, the court noted that “the record shows defendants could not afford to pursue the matter, not that they lost faith in the merit of their claims.” (Ibid.) Similarly, in Oprian, the Fourth Appellate District held that the voluntary dismissal of a complaint to avoid further fees and costs and the inconvenience of a second trial did not constitute a termination in the defendant’s favor. (Oprian, supra, 220 Cal.App.3d at p. 345.)

In opposition, Plaintiff contests the arguments made by Crowley without offering any admissible evidence to dispute them. Also, Plaintiff claims that the court’s order granting his motion for attorney’s fees in the prior action demonstrates that Crowley had no legal standing to bring a lawsuit against him. (See Complaint at ¶ 21; Exhibit 3.) In part, Judge McKenney stated in the order on the motion for attorney’s fees from the underlying action that “It is not understood how plaintiff [IPXC] filed a lawsuit without knowing that it did not have standing.” (Id. at Exhibit 3 at p. 6:7-8.)

Thus, it appears that Plaintiff would like this court to take judicial notice of the court’s prior order on the motion for attorney’s fees from the underlying action. However, judicial notice of findings of fact does not mean that those findings of fact are true; it means only that those findings of fact were made. (Steed v. Department of Consumer Affairs (2012) 204 Cal.App.4th 112, 120-121.) Neither a finding of fact made after a contested adversary hearing nor a finding of fact made after any other type of hearing can be indisputable deemed to have been a correct finding. (Id. at p. 121.)

Furthermore, “a lack of standing is a jurisdictional defect. A dismissal for lack of jurisdiction does not involve the merits and cannot constitute a favorable termination.” (Hudis v. Crawford (2005) 125 Cal.App.4th 1586, 1592 [internal citations and quotation marks omitted].) Therefore, the court finds that the dismissal does not constitute a favorable termination for purposes of establishing liability for malicious prosecution.

2. Lack of Probable Cause

Even if there were a favorable termination on the merits, Crowley also argues that there was probable cause to bring suit against Plaintiff in the underlying action.

“The question of probable cause is whether, as an objective matter, the prior action was legally tenable or not. Probable cause is a suspicion founded upon circumstances sufficiently strong to warrant a reasonable man in the belief that the charge is true.” (Mendoza v. Wichmann (2011) 194 Cal.App.4th 1430, 1449 [internal citations and quotation marks omitted].)

“In analyzing the issue of probable cause in a malicious prosecution context, the trial court must consider both the factual circumstances established by the evidence and the legal theory upon which relief is sought. 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.” (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 164-165.) “In determining whether the prior action was legally tenable, i.e., whether the action was supported by probable cause, the court is to construe the allegations of the underlying complaint liberally, in a light most favorable to the malicious prosecution defendant.” (Id. at p. 165.)

“Because the existence of probable cause may be a question of law, a malicious prosecution plaintiff opposing an anti-SLAPP motion where the facts surrounding probable cause in the underlying action are not in dispute must establish the defendant’s lack of probable cause in the underlying action as a matter of law in order to survive an anti-SLAPP motion. If the undisputed facts establish the existence of probable cause as a matter of law, there is no showing the plaintiff can make to demonstrate a likelihood of succeeding on the merits of her malicious prosecution complaint.” (Mendoza v. Wichmann, supra, 194 Cal.App.4th at p. 1450.)

“In general, a lawyer is entitled to rely on information provided by the client. If the lawyer discovers the client’s statements are false, the lawyer cannot rely on such statements in prosecuting an action.” (Daniels v. Robbins, supra, 182 Cal.App.4th at p. 223 [internal citations and quotation marks omitted].) In support, attorney Crowley, through his declaration, states that in asserting claims against Plaintiff, he relied on information provided by his client, IPXC, and by Villegas, IPXC’s President and CEO. (See Declaration of John Kevin Crowley at ¶¶ 7-9.) Attorney Crowley believed that each cause of action was fully supported by probable cause and had merit. (Id. at ¶ 9.) Furthermore, attorney Crowley became convinced that Plaintiff was guilty of wrongdoing in the underlying action because: (1) Plaintiff seemed reluctant to sign the Non-Disclosure Agreement and appeared to have concerns about attorney’s fees and violating the agreement; (2) Plaintiff also worked for a company that did a great deal of intellectual property work; and (3) when Plaintiff returned from the Middle East, he wanted more control and ownership of the company. (Id. at ¶ 8.)

In opposition, Plaintiff argues that Crowley did not have probable cause to bring suit because of his lack of candor with the court, his status as one of three shareholders, his status as chief legal officer, and his obligations under Code of Civil Procedure section 128.7, subdivision (b) to make reasonable inquiries under the circumstances. (See OPP at p. 10:15-19.) However, such arguments do not appear to be supported by admissible evidence. Beyond that, Plaintiff attempts to introduce prior deposition testimony from Villegas in the underlying action which constitutes hearsay not subject to an applicable exception. (See Evid. Code § 1292, subd. (a); Evidentiary Objection No. 16.) Therefore, the court finds that Plaintiff has not offered sufficient evidence to establish a lack of probable of cause to support his malicious prosecution claim. Plaintiff having failed to make a proper showing with respect to the first and second elements of his malicious prosecution claim, the court declines to address whether the prior lawsuit was initiated with malice.

Accordingly, Crowley’s special motion to strike the complaint for malicious prosecution is GRANTED.