Grace v. Smith

Filed 2/3/10

Grace v. Smith CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

FOURTH APPELLATE DISTRICT

DIVISION THREE

Appeal from an order of the Superior Court of Orange County, Steven L. Perk, Judge. Affirmed.

Benedon & Serlin and Gerald M. Serlin for Cross-defendant and Appellant.

Emge Law Group and Holly M. Emge for Cross-complainant and Respondent.

* * *

This case involves two attorneys in a fee dispute relating to their successive representation of a client. After the case settled, Gregory W. Smith, the second attorney to represent the client, filed a declaratory relief action to determine the amount of fees owed to him and to Patricia J. Grace, the clients first attorney. Grace cross-complained in the declaratory relief action, seeking enforcement of her lien and alleging causes of action for breach of fiduciary duty, fraud, and intentional interference with economic advantage. Smith filed a special motion to strike under Code of Civil Procedure section 425.16, the anti-SLAPP statute.^[1] (Subsequent statutory references are to the Code of Civil Procedure.) The trial court denied the motion, and Smith now appeals.

As we discuss below, the motion was properly denied because Graces cross-complaint did not arise from Smiths protected activity, but the underlying dispute between the parties as to their entitlement to attorney fees. We therefore affirm the trial courts order denying the motion. We do not, however, find that Smiths appeal was frivolous within the meaning of the anti-SLAPP statutes attorney fee provision, and therefore deny Graces motion for attorney fees.

I

FACTS

In February 2005, Hubert Acevedo, a high-ranking officer with the California Highway Patrol, retained Grace to represent him in employment-related civil claims against the State of California on a contingent fee basis. Grace then filed a civil action in superior court (Case One). Several months later, Acevedo also retained Grace to handle related administrative claims before the State Personnel Board (SPB) on an hourly fee basis. In both instances, Acevedo signed retainer agreements which included clauses creating a lien for attorney fees. Before the SPB, Acevedo won his claims based on whistleblower statutes, but lost on his claims under the Fair Employment and Housing Act. He was awarded $40,000.

After the SPB action was completed, in February 2008, Acevedo discharged his attorney and retained Smith as counsel. A letter dated February 25 advised Grace that Smith had been retained as counsel. On February 26, Grace filed a second civil lawsuit (Case Two), purportedly on Acevedos behalf, apparently alleging similar claims to Case One, which was still pending.

On March 11, Grace filed a notice of lien for attorney fees in Case One, which did not specify an amount. On March 13, Smith filed a substitution of attorney on Case One. On April 8, Grace filed a motion and accompanying declaration in the SPB action, requesting attorney fees of $63,600. On April 11, she filed a motion requesting to be relieved as counsel in Case Two.

On May 1, Smith settled Case One for $995,000. As he was also retained pursuant to a contingent fee agreement, he claimed a fee of $395,000. In May and June, Grace and Smith exchanged correspondence regarding Graces lien. Eventually, Grace became represented by counsel, but continuing correspondence regarding the dispute produced no resolution.

On June 11, Smith filed a declaratory relief action seeking a judicial determination as to the amount of attorney fees the parties should receive. Grace then filed the instant cross-complaint, asserting claims for enforcement of her lien, breach of fiduciary duty, fraud, and intentional interference with economic advantage. Smith filed a motion to strike under the anti-SLAPP statute, arguing that Graces claims arose from Smiths exercise of his constitutional rights, specifically statements made in connection with an issue before a judicial body. The trial court denied the motion, finding that Smith had not met his burden to demonstrate the challenged causes of action arose from protected speech. Smith now appeals.

II

DISCUSSION

Jurisdiction and Standard of Review

An order denying a special motion to strike is subject to immediate appeal. (Code Civ. Proc.,  425.16, subd. (j)(1).) We exercise independent judgment to determine whether the motion to strike should have been granted. (Flatleyv. Mauro (2006) 39 Cal.4th 299, 325.)

Section 425.16

A SLAPP suit is a meritless suit filed primarily to chill the defendants exercise of First Amendment rights. (Wilcox v. Superior Court (1994) 27 Cal.App.4th 809, 815, fn. 2, disapproved of on other grounds in Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 68, fn. 5.) In response to the threat such lawsuits posed to the important public policy of open and free participation in the democratic process, the Legislature adopted section 425.16: A cause of action against a person arising from any act of that person in furtherance of the persons right of petition or free speech under the United States Constitution or the California Constitution in connection with a public issue shall be subject to a special motion to strike, unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim. ( 425.16, subd. (b)(1).) The purpose of the anti-SLAPP statute is to dismiss meritless lawsuits designed to chill the defendants^[2]free speech rights at the earliest stage of the case. (See Wilcox v. Superior Court, supra, 27 Cal.App.4th at p. 815, fn. 2.) The statute is to be construed broadly. ( 425.16, subd. (a).)

The statute provides that an act in furtherance of a persons right of petition or free speech . . . in connection with a public issue includes: (1) any written or oral statement or writing made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law; (2) any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law; (3) any written or oral statement or writing made in a place open to the public or a public forum in connection with an issue of public interest; (4) or any other conduct in furtherance of the exercise of the constitutional right of petition or the constitutional right of free speech in connection with a public issue or an issue of public interest. ( 425.16, subd. (e).)

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 defendants 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. ( 425.16, subd. (b)(1).) 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, supra, 31 Cal.4th at p. 733.)

Conversely, if the defendant does not demonstrate this initial prong, the court should deny the anti-SLAPP motion and need not address the second step. (City of Riverside v. Stansbury (2007) 155 Cal.App.4th 1582, 1594. Only a cause of action that satisfies both prongs of the anti-SLAPP statutei.e., that arises from protected speech or petitioning and lacks even minimal meritis a SLAPP, subject to being stricken under the statute. (Navellier v. Sletten (2002) 29 Cal.4th 82, 89 (Navellier).)

Protected Activity

First we decide whether the challenged claims arise from acts in furtherance of the defendants right of free speech or right of petition under one of the four categories set forth in section 425.16, subdivision (e). (Braun v. Chronicle Publishing Co. (1997) 52 Cal.App.4th 1036, 1043.) In doing so, we examine the principal thrust or gravamen of a plaintiffs cause of action to determine whether the anti-SLAPP statute applies . . . . (Ramona Unified School Dist. v. Tsiknas (2005) 135 Cal.App.4th 510, 519-520.) Accordingly, we focus on the specific nature of the challenged protected conduct, rather than generalities that might be abstracted from it. [Citation.] (Dyer v. Childress (2007) 147 Cal.App.4th 1273, 1279.)

We assess the principal thrust by identifying [t]he allegedly wrongful and injury-producing conduct . . . that provides the foundation for the claim. [Citation.] (Hylton v. Frank E. Rogozienski, Inc. (2009) 177 Cal.App.4th 1264, 1272 (Hylton).) We keep in mind that the mere fact that an action was filed after protected activity took place does not mean the action arose from that activity for the purposes of the anti-SLAPP statute. [Citation.] Moreover, that a cause of action arguably may have been triggered by protected activity does not entail that it is one arising from such. [Citation.] In the anti-SLAPP context, the critical consideration is whether the cause of action is based on the defendants protected free speech or petitioning activity. [Citations.] (Navellier, supra, 29 Cal.4th at p. 89.) Therefore, to conclude the arising from prong is met, the action must actually allege the harm was caused by the protected acts.

Smith claims that Graces cross-complaint seeks to enforce a writing (her lien) which she filed in a pending legal action (the Acevdeo action). . . . Her entire cross-complaint is based on i.e., arises from Smiths conduct in connection with that writing as part of the settlement of the Acevedo action. While Graces claims are related to the existence of the underlying action, we disagree with Smith that they arise from it within the meaning of the anti-SLAPP law. Nothing in Graces claims relates to the substance of the underlying case, merely its existence. The underlying case, in fact, could be any case, and the dispute between Grace and Smith is about attorney fees, not the underlying case or any protected activity undertaken by Smith during that cases pendency.

Smiths motion in the instant case bears some similarity to the anti-SLAPP motion at issue in Hylton, supra, 177 Cal.App.4th 1264. Hylton sued his former attorney, whom he had hired in connection with a wrongful termination action. He alleged the attorney had breached his fiduciary duty to him by attempting to extract an excessive fee. (Id. at p. 1269.) The attorneys actions allegedly included making false statements to Hylton about Hyltons ownership in company stock, and ultimately inducing Hylton to settle the case, thus triggering a contingency fee that was based on the amount of stock Hylton retained. (Ibid.) The attorney filed a special motion to strike, arguing the anti-SLAPP statute applied because the action was based on the attorneys protected petitioning activity: [T]he complaint sought to pursue claims that arose from statements made before a judicial proceeding or in connection with an issue under consideration by a judicial body, and therefore the underlying conduct constituted protected petitioning activity within the meaning of the anti-SLAPP statute. (Id. at pp. 1269-1270.)

The Court of Appeal, agreeing with the trial court, disagreed. The Court of Appeal affirmed the trial courts denial of the special motion to strike, holding, Hyltons claims allude to [the attorneys] petitioning activity, but the gravamen of the claim rests on the alleged violation of [the attorneys] fiduciary obligations to Hylton by giving Hylton false advice to induce him to pay an excessive fee to [the attorney]. (Hylton, supra, 177 Cal.App.4th at p. 1274.) If the core injury-producing conduct upon which the plaintiffs claim is premised does not rest on protected speech or petitioning activity, collateral or incidental allusions to protected activity will not trigger application of the anti-SLAPP statute. (Id. at p. 1272.)

Like the situation in Hylton, the gravamen of Graces claims here is not protected speech or petitioning activity it relates to Smiths alleged failure to honor her attorney fee lien. In her breach of fiduciary duty and fraud claims, she asserts that Smiths actions caused her to endorse the settlement check and return it to Smith. In her claim for interference with prospective economic advantage, she alleges that Smith wrongfully disbursed the bulk of the settlement. These actions constitute the gravemen of Graces claims.

The harm Grace alleges is not based on (1) any written or oral statement or writing made before a . . . judicial proceeding, or any other official proceeding authorized by law or (2) any written or oral statement or writing made in connection with an issue under consideration or review by a . . . judicial body . . . . ( 425.16, subd. (e).) Graces alleged harm is based on Smiths purported failure to negotiate in good faith, which led to the declaratory relief action, and not the declaratory relief action itself or the underlying case. Put another way, Grace is not seeking damages because Smith exercised his right of free speech or petition; she seeks damages because Smith allegedly failed to honor Graces liens and committed other torts related to the fee dispute. Therefore, this is not a case that implicates the anti-SLAPP statute.

As we have determined that the first prong of the anti-SLAPP statute was not met, we need not consider whether Grace is likely to succeed on the merits. The trial court properly denied Smiths motion.

Attorney Fees

Grace filed a separate motion seeking attorney fees if she prevailed on this appeal. Pursuant to section 425.16, subdivision (c)(1), a prevailing plaintiff is entitled to attorney fees if the appeal was frivolous or brought for purposes of delay. This is a high standard, requiring a finding that any reasonable attorney would agree the motion was totally devoid of merit under section 128.5. (Karwasky v. Zachay (1983) 146 Cal.App.3d 679, 681.)

Nothing in Graces motion persuades us that Smiths appeal meets this burden. She cites somewhat trivial, and ultimately irrelevant, misstatements of fact and Smiths failure to properly cite the record. While such lapses, where indeed they exist, are troublesome, they do not establish that as a whole the appeal was frivolous. Nor do Smiths attempts to interpret precedent in the manner most favorable to his argument. Based on the whole of the record, and the difficult and continually evolving law relating to the anti-SLAPP statute, we cannot conclude that Smiths appeal was frivolous. We therefore decline to award attorney fees.

Graces Motions to Strike

Grace brought three separate motions to strike portions of Smiths opening brief, ultimately withdrawing one. Her two remaining motions challenge Smiths statement of facts in the record and his legal argument regarding the litigation privilege with respect to the second prong of the anti-SLAPP analysis. Her arguments regarding facts in the record concern trivial matters and do not subject Smiths brief to a motion to strike. As we need not reach the question of whether Graces claims were subject to the litigation privilege, the motion to strike this argument is moot. The motions to strike are therefore denied.

III

DISPOSITION

The order is affirmed. Grace is entitled to her costs, not including attorney fees, on appeal.

MOORE, J.

WE CONCUR:

OLEARY, ACTING P. J.

FYBEL, J.

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^[1]SLAPP is an acronym for strategic lawsuits against public participation. (Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 732, fn. 1.)

^[2]Smith, as cross-defendant, is the defendant in this context.