Mejia v. Hamburg, Karic, Edwards & Martin LLP

Filed 2/11/08 Mejia v. Hamburg, Karic, Edwards & Martin LLP CA2/2

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

APPEAL from a judgment of the Superior Court of Los Angeles County.

Alice E. Altoon, Judge. Affirmed.

Yee & Belilove, Steven R. Yee, Steve R. Belilove, Robert A. Hufnagel for Cross-defendant and Appellant.

Parker Mills Morin, Parker Mills, David B. Parker, Ann C. Schneider for Cross-complainant and Respondent.

___________________________________________________

The plaintiff asked the trial court to strike a cross-claim for breach of fiduciary duty, on the grounds that it violates the anti-SLAPP statute. (Code Civ. Proc.,  425.16.)^[1] The trial court denied the motion to strike, finding that the cross-complainant is likely to prevail on her claim. We affirm.

FACTS

The Complaint And Cross-Complaint

Plaintiff Hamburg, Karic, Edwards & Martin LLP (the Law Firm) sued defendant Maria Mejia in a dispute over legal fees. The Law Firm alleges that it entered a written retainer agreement to represent Mejia in an action she filed against the City of Los Angeles (the City). The retainer agreement granted the Law Firm a lien against Mejias recovery.^[2] The Law Firm claims that Mejia owes it $136,784 for its services.

Mejia cross-complained against the Law Firm for malpractice and breach of fiduciary duty. Mejia alleges that the Law Firm breached its fiduciary duty by extracting and attempting to enforce the lien contained in the retainer agreement, in violation of state law. The malpractice claim is not at issue in this appeal.

The Law Firms Special Motion To Strike

The Law Firm filed a special motion to strike Mejias cross-claim for breach of fiduciary duty. The motion is based on the fact that Mejia has engaged in a course of retaliating and oppressive litigation to discourage [the Law Firms] right to petition and utilize the courts to seek legal redress for legal remedies against Mejia and to discourage and prevent [the Law Firms] right to enforce its lien. The Law Firm reasons that its filing of the lien and the complaint is litigation activity protected by section 425.16. Further, the Law Firm argues, there is no reasonable probability that Mejia will succeed on the merits because (1) her claim is barred by the litigation privilege and (2) enforcing a lien is not a breach of fiduciary duty.

Mejia responded that her claim for breach of fiduciary duty does not fall under section 425.16 because it arises from the Law Firms wrongful inclusion of an illegal lien clause in the parties retainer agreement, not from any written or oral statements made in litigation pertaining to the lien. The lien is unenforceable because it violates state rules of professional conduct. Mejia asserts that she is likely to succeed on her claim because the Law Firms violation of the professional rules is a breach of fiduciary duty.

The Trial Courts Ruling

The trial court found that the gravamen of Mejias claim for breach of fiduciary duty is the Law Firms filing of its lien, conduct that was in furtherance of the Law Firms petition rights under section 425.16. However, Mejia was entitled to proceed with her claim because she was likely to prevail on the merits: when the Law Firm sought a lien against Mejia without first complying with the rules of professional conduct, a breach of its fiduciary duty probably occurred. The Law Firm appeals from the order denying its motion to strike.

DISCUSSION

1. Appeal And Review

Appeal lies from the order denying the Law Firms motion under the anti-SLAPP statute. ( 425.16, subd. (i).) The courts ruling on the motion is subject to our independent, de novo review. (Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 269, fn. 3; Huntingdon Life Sciences, Inc. v. Stop Huntingdon Animal Cruelty USA, Inc. (2005) 129 Cal.App.4th 1228, 1245.)

2. Overview Of The Anti-SLAPP Statute

The anti-SLAPP statute is aimed at curbing lawsuits brought primarily to chill the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances. ( 425.16, subd. (a); Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 738-739 (Jarrow.).) Protection is extended to any written or oral statement or writing made before a . . . judicial proceeding; to any written or oral statement or writing made in connection with an issue under consideration or review by a . . . judicial body . . .; and to any conduct in furtherance of the exercise of the constitutional right of petition . . . . ( 425.16, subd. (e)(1), (2), (4).) The right of access to courts is an aspect of the First Amendment right of petition. (Jarrow, supra, 31 Cal.4th at p. 736, fn. 5.) The Legislature commands that the provisions of the anti-SLAPP statute be construed broadly. ( 425.16, subd. (a); Jarrow, supra, 31 Cal.4th at p. 735.)^[3]

There are two components to a motion to strike brought under section 425.16. First, the party challenging the lawsuit must make a threshold showing that the claim arises from an act in furtherance of his constitutional right to petition or to free speech. (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67.) Second, if the lawsuit affects a protected right, the court determines whether there is a reasonable probability that the plaintiff will prevail on the claim. ( 425.16, subd. (b)(1); City of Cotati v. Cashman (2002) 29 Cal.4th 69, 76; Zamos v. Stroud (2004) 32 Cal.4th 958, 965.) The court does not weigh the evidence, but accepts as true all evidence favoring the party asserting the cause of action. (Nagel v. Twin Laboratories, Inc. (2003) 109 Cal.App.4th 39, 45-46.)

3. Application Of The Anti-SLAPP Statute

a. Threshold Showing That The Lawsuit Arises From Protected Activity

There are two facets to Mejias breach of fiduciary duty claim. The first aspect involves the Law Firms unprotected, prelitigation conduct. The Law Firm violated the rules of professional conduct by including a lien clause in its retainer agreement that lacked necessary client safeguards. Lawyers are forbidden from acquiring pecuniary interests adverse to a client unless the terms are fair and reasonable; the terms are fully disclosed in writing; the client is advised that the advice of an independent lawyer may be sought; and the client consents in writing to the terms of the transaction. (Rules Prof. Conduct, rule 3-300 (rule 3-300).) The Supreme Court has held that an attorneys lien is a security interest to which rule 3-300 applies. (Fletcher v. Davis(2004) 33 Cal.4th 61, 66-69 (Fletcher).) The Law Firms prelitigation conduct of including a defective lien clause in its retainer agreement does not fall within the scope of the anti-SLAPP statute.

Although the Law Firms conduct fell below the standard of care for lawyers when it failed to comply with rule 3-300, Mejias fiduciary duty claim did not ripen until (1) the Law Firm went to court and attempted to enforce the purported lien in Mejia v. Los Angeles, and (2) Mejia sustained actual damage in the form of attorney fees while resisting the Law Firms lien enforcement effort. Claims relating to a defendants lien activities fall generally within the scope of the anti-SLAPP statute. (Premier Medical Management Systems, Inc. v. California Ins. Guarantee Assn. (2006) 136 Cal.App.4th 464, 473-477.) The gravamen or essence of Mejias claim is that the Law Firm wrongfully attempted to enforce an unenforceable lien in the context of a lawsuit. Mejias claim arose from the Law Firms litigation activity within the meaning of the anti-SLAPP statute.

b. Probability Of Prevailing

Once the first component of an anti-SLAPP motion is satisfied, the burden shifts to the party asserting the cause of action to establish a probability of prevailing. (HMS Capital, Inc. v. Lawyers Title Co. (2004) 118 Cal.App.4th 204, 213.) Section 425.16 does not allow the defending party to escape the consequences of wrongful conduct by asserting a spurious First Amendment defense. (Navellier v. Sletten (2002) 29 Cal.4th 82, 93.) If the claim stated in the pleading is legally sufficient and is supported by prima facie evidence, it is not subject to being stricken as a SLAPP. (Ibid.; Jarrow, supra, 31 Cal.4th at p. 738; Major v. Silna (2005) 134 Cal.App.4th 1485, 1498.) In short, the statute poses no obstacle to suits that possess minimal merit. (Navellier v. Sletten, supra, 29 Cal.4th at p. 93.)

The Law Firms lien clause, on its face, violates rule 3-300. The standards governing an attorneys ethical duties are conclusively established by the Rules of Professional Conduct. (Day v. Rosenthal (1985) 170 Cal.App.3d 1125, 1147.) Violation of the rules of professional conduct demonstrates a breach of fiduciary duty. The scope of an attorneys fiduciary duty may be determined as a matter of law based on the Rules of Professional Conduct which, together with statutes and general principles relating to other fiduciary relationships, all help define the duty component of the fiduciary duty which an attorney owes to his [or her] client. (Stanley v. Richmond (1995) 35 Cal.App.4th 1070, 1086; American Airlines, Inc. v. Sheppard, Mullin, Richter & Hampton (2002) 96 Cal.App.4th 1017, 1032; Mirabito v. Liccardo (1992) 4 Cal.App.4th 41, 45.) The Supreme Court has expressly held that attorney liens that fail to meet the requirements of rule 3-300 are unenforceable. (Fletcher, supra, 33 Cal.4th at pp. 71-72.)

Despite its violation of rule 3-300--and ignoring Fletcher--the Law Firm forged ahead and attempted to enforce its lien, causing damage to Mejia by obliging her to expend attorney fees to resist the Law Firms efforts. There is a reasonable probability that the Law Firm breached its fiduciary duty by (1) violating the rules of professional conduct and ignoring the controlling Supreme Court authority on the subject of attorney liens; (2) attempting to assert an unenforceable adverse interest against its client; and (3) causing the client to expend attorney fees in response to the Law Firms efforts to collect on its unenforceable lien. Mejia has stated a valid claim against the Law Firm and is likely to prevail upon it.

The Law Firm asserts a number of arguments against Mejias breach of fiduciary claim. None of the arguments are meritorious.

First, the Law Firm continues to insist that its lien was not improper. The Law Firm does not dispute that it filed a lien in 2005 pursuant to the parties retainer agreement. The lien clause in the retainer agreement was legally deficient. The filing of the unenforceable lien was in direct contravention of the Supreme Courts 2004 decision in Fletcher, and it was improper.

Second, the Law Firm justifies its actions by noting that it withdrew its contractual lien in 2006, promptly replacing it with an equitable lien. Withdrawing the invalid contractual lien after attempting to enforce it for seven months does not absolve the Law Firm from the consequences of its wrongdoing. In any event, the Law Firms filing of an equitable lien against its client cannot succeed. In California, an attorneys lien is created only by contract . . . . Unlike a service lien or mechanics lien, for example . . . an attorneys lien is not created by the mere fact that an attorney has performed services in a case. (Fletcher, supra, 33 Cal.4th at p. 66.)

The Law Firm relies upon a case in which an equitable lien was applied in favor of an attorney in a dispute between the attorney and a third party judgment creditor over an interpleaded settlement fund, where the client did not assert any right to the interpleaded funds. (County of Los Angeles v. Construction Laborers Trust Funds for Southern California Admin. Co.(2006) 137 Cal.App.4th 410.) The County of Los Angelescase is factually distinguishable. Here, the Law Firm is fighting directly with its client over the imposition of the lien, not with a third party creditor. If we were to countenance an equitable lien against Mejia, we would reward the Law Firm for ignoring rule 3-300 and the rule of law pronounced in Fletcher, which require informed client consent for an attorneys lien. In Fletcher, the court refused to countenance a violation of rule 3-300, a rule the court approved to protect the public and to promote respect and confidence in the legal profession.(33 Cal.4th at p. 72)

Next, the Law Firm contends that the litigation privilege shields it from Mejias claim. The litigation privilege shields any publication or broadcast made [i]n any . . . judicial proceeding. (Civ. Code, 47, subd. (b).) As a general rule, the privilege applies only to communicative acts and does not privilege tortious courses of conduct. (Olszewski v. Scripps Health (2003) 30 Cal.4th 798, 830; Action Apartment Assn., Inc. v. City of Santa Monica(2007) 41 Cal.4th 1232, 1249.) The privilege protects the filing of an authorized statutory lien ifthe plaintiff does not allege that defendant committed other, unauthorized acts in connection with the filing of the lien. (Olszewski v. Scripps Health, supra, 30 Cal.4th at pp. 831-832.)

A case on point is LiMandri v. Judkins (1997) 52 Cal.App.4th 326. Judkins was an attorney who surreptitiously created a security interest on behalf of his client, asserting superior rights to settlement proceeds in underlying litigation. Judkins filed a lien in the underlying litigation, and the settling party interpleaded the proceeds of the settlement, tying up the money for seven months and causing attorney fees to be incurred. (Id. at pp. 334-335.) The court rejected Judkinss argument that the litigation privilege barred the claim against him for interference with contract. The claim was based on an alleged tortious course of conduct, including Judkinss preparation of the security interest and his refusal to concede that the security interest he created did not have superiority. Judkinss filing of the lien was only one act in the overall course of conduct. (Id. at p. 345.) Moreover, neither Judkins nor his client was a litigant in the underlying litigation: A stranger to a civil action does not become a litigant or other participant in the action merely by filing a notice of lien against any judgment or settlement proceeds the plaintiff might realize in the action. (Ibid.) Finally, the privilege did not apply because none of Judkinss conduct was connected or logically related to [the underlying] litigation or engaged in for the purpose of achieving its objects. (Id. at p. 346.) In other words, a document such as a lien is not privileged merely because it has been filed with a court or in an action. It has to have some relationship to an issue in the underlying action. (Ibid.)

The reasoning of LiMandri v. Judkins applies here. The litigation privilege does not apply in this case, where Mejia has alleged a tortious course of conduct, beginning with the Law Firms creation of an unenforceable contractual lien in the retainer agreement, and continuing with the Law Firms disobedience of Fletcher and its refusal to acknowledge the invalidity of the lien it was attempting to enforce. As in the LiMandri case, the Law Firms filing of a lien was not aimed at achieving the objectives of the litigation in Mejia v. Los Angeles. The Law Firms lien was merely one unauthorized act in a course of conduct that arose outside of the underlying litigation. Thus, the litigation privilege does not apply to the Law Firms filing of a lien in the underlying action.

The Law Firm maintains that the claim against it fails as a matter of law because [t]he filing of a proper lien to recover unpaid fees is not a breach of fiduciary duty. As detailed above, the Law Firm did not file a proper lien. Its lien was unenforceable under rule 3-300 and Fletcher. The Law Firm cannot circumvent the effect of its failure to comply with rule 3-300 by claiming an equitable lien.

Finally, with respect to the statute of limitations, the Law Firm fell below the standard of care owed to its client when it included a lien clause in its retainer agreement that was adverse to its clients interests, without making the disclosures required by rule 3-300. The initial breach of fiduciary duty thus occurred at the inception of the attorney-client relationship. An action for breach of fiduciary duty based on a violation of rule 3-300 is governed by the one-year limitations period specified in section 340.6. (Stoll v. Superior Court (1992) 9 Cal.App.4th 1362, 1365-1369.)^[4] However, the action is tolled if the client has not sustained actual injury. ( 340.6, subd. (a)(1).) Mejias claim for breach of fiduciary duty did not accrue until she sustained actual injury, i.e., incurred attorney fees and costs while resisting the Law Firms efforts to enforce its unenforceable lien. The date that the Law Firms attorney-client relationship ended with Mejia is not germane in this situation.

DISPOSITION

The judgment is affirmed. Mejias request for sanctions is denied.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.

BOREN, P.J.

We concur:

DOI TODD, J. CHAVEZ, J.

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^[1] A SLAPP is a Strategic Lawsuit Against Public Participation. All further statutory references are to the Code of Civil Procedure.

^[2] The lien clause reads, Client hereby grants Attorney a lien on any and all causes of action which Client may assert in any court action brought by Attorney on Clients behalf under this Agreement. Such lien shall be in addition to all other rights of Attorney to receive sums owing from Client under this Agreement.

^[3] The anti-SLAPP statute applies to cross-complaints as well as to complaints. ( 425.16, subd. (h); Jarrow, supra, 31 Cal.4th at p. 735, fn. 2.)

^[4] An action against an attorney for a wrongful act or omission, other than for actual fraud, arising in the performance of professional services shall be commenced within one year after the plaintiff discovers, or through the use of reasonable diligence should have discovered, the facts constituting the wrongful act or omission . . . . ( 340.6, subd. (a).)