Monarch Consulting v. Zamora

 

 

 

 

Filed 1/31/14  Monarch
Consulting v. Zamora CA2/8

>NOT
TO BE PUBLISHED IN THE OFFICIAL REPORTS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opinion has not been certified for publication or ordered published for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 EIGHT

 

 
>

MONARCH CONSULTING, INC.,   Plaintiff and Appellant,                           v.   VICTORIA ZAMORA,   Defendant and Respondent.

B244791         (Los Angeles County        Super. Ct. No. EC059320)

 

 

 

            APPEAL from the order of the href="http://www.fearnotlaw.com/">Superior Court of Los Angeles County.  William D. Stewart, Judge.  Reversed and remanded.

 

            Law Offices of Farah Faramarzi and
Farah Faramarzi for Plaintiff and Appellant.

 

            Law Offices for Bernard R. Schwam
and Bernard R. Schwam for Defendant and Respondent.

 

 

 

 

* * * * * * * * * *

            Defendant and respondent
Victoria Zamora was employed as vice president of plaintiff and appellant Monarch
Consulting, Inc.  Defendant resigned from
her position in May 2011.  After leaving
plaintiff’s employ, defendant went to work for one of plaintiff’s
competitors.  Plaintiff learned of
defendant’s new position and sent a cease and desist letter to her and her new
employer, asserting defendant had breached the nondisclosure href="http://www.mcmillanlaw.us/">agreement she signed with plaintiff.  Several months later, plaintiff sued defendant
for breach of contract and common counts based on defendant’s alleged failure
to repay loans plaintiff had extended to her during her tenure.  Defendant filed a cross-complaint against
plaintiff and its CEO, Stuart Grant, for libel, failure to pay wages, and
related claims.

            Plaintiff and Grant filed a special
motion to strike pursuant to Code of Civil Procedure section 425.16 (section
425.16) seeking to dismiss the libel cause of action.  Before the hearing on the motion, defendant
filed a nonopposition to the motion, as well as a first amended cross-complaint
dismissing the libel cause of action
and Grant as an individual cross-defendant. 


            At the hearing on the motion, plaintiff
asked the court to rule on the motion as a predicate for a ruling on
plaintiff’s request for attorney fees pursuant to section 425.16.  The court denied the fee request, finding
that plaintiff had not established the motion was meritorious because it failed
to show the prelitigation statements upon which defendant’s libel claim was
based were protected by section 425.16.  The
trial court therefore found there was no basis for awarding fees to plaintiff.

Plaintiff timely appealed, arguing the trial court erred in denying
its fee request.  Plaintiff contends the
allegedly libelous statements were good faith prelitigation statements
protected by section 425.16.  We conclude
plaintiff discharged its movant’s burden to show defendant’s href="http://www.mcmillanlaw.us/">cross-complaint for libel arose from
petitioning activity protected by section 425.16, that defendant failed to show
a probability of prevailing, and plaintiff was entitled to consideration of its
request for statutory fees.  We therefore
reverse and remand with directions for the trial court to conduct further
proceedings on plaintiff’s request for attorney
fees pursuant to section 425.16.

FACTUAL AND PROCEDURAL BACKGROUND

            Plaintiff provides payroll services
to entertainment industry clients.  Grant
is its sole shareholder and CEO.  Grant
hired defendant in February 2008 to oversee plaintiff’s payroll operations,
sales and software development.  At the
time of her hire, defendant signed an Employee Non-Disclosure Agreement (the
agreement).  The agreement provides, in
relevant part, that in the event of the termination of her employment, defendant
would not disclose any of plaintiff’s trade secrets or href="http://www.sandiegohealthdirectory.com/">confidential, proprietary
data, and would return any such documents, materials and data that defendant
maintained in her possession. 

In January 2010, Grant promoted defendant to vice president.  A little over a year later, on May 10, 2011, defendant emailed Grant and told him she planned to resign her
position effective May 31, 2011.  The next day, Grant and defendant discussed
her notice of resignation, and defendant told Grant she was not happy with “the
direction” he was taking the company and that she needed time to address some
personal issues.  She also represented
she had not lined up any new job, but was considering moving back home to North Carolina.  

On June
1, 2011, Grant sent an email to Tina
Mendoza, one of plaintiff’s larger clients (the June 2011 email).  Defendant had previously been the primary
contact person for Ms. Mendoza in her dealings with plaintiff.  Grant wanted to advise Ms. Mendoza of
defendant’s departure and let her know to whom she should direct her future
inquiries.  The email stated defendant was
“taking [a] leave” and Grant was unsure whether she would be returning, but
that it “would be inappropriate” for him to give further details.   

            Grant then learned defendant had
taken a position with a competitor of plaintiff’s, CAPS Universal (CAPS).  He also discovered that defendant had
contacted at least one of plaintiff’s clients, Michael Bouson, and that
defendant had emailed confidential materials to her personal email address
before she left.  Grant contacted an
attorney about his concern that defendant may have breached the agreement by
contacting plaintiff’s clients and possibly sharing trade secret information
with her new employer.  Attorneys on
behalf of plaintiff and Grant sent a cease and desist letter, dated June 21, 2011, to defendant and CAPS (the cease and desist letter).   

            Attorneys representing both
defendant and her new employer, CAPS, sent a responsive letter to plaintiff’s
counsel denying any disclosure or misuse of proprietary information.  The letter, among other things, also asserted
that defendant was owed back wages and that defendant had only lawfully
contacted certain of plaintiff’s clients to advise of her new work affiliation
with CAPS.  

            On January 23, 2012, plaintiff filed the underlying action against defendant, stating
claims for breach of contract and common counts based on defendant’s failure to
repay $19,100 in loans made to her during her tenure.  Plaintiff’s complaint did not contain any
claims alleging breach of the agreement, misappropriation of trade secrets or
similar claims.  

            Defendant answered the complaint and
filed a cross-complaint against both plaintiff and Grant, stating claims for
libel, failure to pay wages, and related claims.  The first cause of action for libel was based
on two allegedly defamatory statements: 
the June 2011 email, and the cease and desist letter.   

            Plaintiff and Grant filed a special
motion to strike pursuant to section 425.16 seeking an order striking
defendant’s cause of action for libel.  The
motion was based on the declaration of Grant and three attached exhibits (the
June 2011 email, the cease and desist letter which included a copy of the
agreement, and the responsive letter from counsel for defendant and CAPS). 

            In his declaration, Grant attested
to his hiring of defendant and the terms of the agreement she executed when she
was hired regarding plaintiff’s proprietary business information.  Grant explained that, at the time defendant
gave notice of resignation, he understood defendant had been going through a
difficult divorce and child custody battle. 
He said defendant denied having any plans regarding a new job and that
she said she felt her “personal problems” were distracting her from her
work.  Defendant told Grant she was
“seriously considering” moving back to North Carolina.  Grant believed defendant was resigning solely
to resolve these personal issues and he was willing to consider her coming back
to work.  He asked her what she wanted
him to tell clients and she suggested he say she was taking “a leave of
absence.” 

            Grant explained he sent the June
2011 email to Ms. Mendoza because he needed her to know who her new contact person
would be at plaintiff in light of defendant’s resignation.   

            Grant also attested to discovering
early on in June 2011 that defendant had begun contacting plaintiff’s clients
in an apparent effort to solicit their business for her new employer, CAPS.  He also saw defendant had sent several emails,
containing plaintiff’s proprietary information, to her personal email
account.  These discoveries prompted
Grant to contact attorneys at Roxborough, Pomerance, Nye & Adreani to
inquire about the options for protecting plaintiff from defendant’s potential
breaches of the agreement.  In response,
Roxborough, Pomerance, Nye & Adreani sent the cease and desist letter to
defendant and CAPS.  

            Grant explained that shortly after
the cease and desist letter was sent, his lawyers provided him with the
responsive letter sent by counsel for defendant and CAPS.  He attested that if defendant had “not ceased
her unlawful communications” following receipt of the cease and desist letter,
he would have immediately authorized plaintiff to proceed with litigation to address
such conduct.  

            In response to the special motion to
strike, defendant filed a nonopposition, along with a first amended
cross-complaint dismissing the libel claim and Grant as an individual
cross-defendant.    

At the August 29, 2012 hearing on the
motion, plaintiff asked the court to rule on the unopposed motion as a
predicate for the filing of a noticed motion for attorney’s fees as the
prevailing party on the special motion to strike.  In denying the motion, the court explained
the statements contained in the June 2011 email and the cease and desist letter
were not protected by section 425.16 because they did not concern the same subject
matter as the complaint to recover the unpaid loans.  Plaintiff had sued defendant solely to
recover the allegedly overdue loans and had not made any claims against
defendant regarding her allegedly improper contact with plaintiff’s clients and
other violations of the agreement as set forth in the cease and desist letter.  Therefore, the court reasoned the June 2011
email and the case and desist letter were not protected speech. 

This appeal followed. 

>DISCUSSION

            Defendant’s dismissal of the libel
claim before the hearing on plaintiff’s special motion to strike did not
extinguish plaintiff’s right to recover attorney fees.  Plaintiff was “entitled to have the merits of
[the] motion heard as a predicate to a determination of [its] motion for
attorney’s fees and costs . . . .’  [Citation.]”
 (Wong
v. Jing (2010) 189 Cal.App.4th 1354, 1365; accord, Liu v. Moore (1999) 69 Cal.App.4th 745, 752-753.)  Therefore, while plaintiff’s appeal
challenges the court’s denial of attorney fees, our task is to review the
court’s finding that plaintiff’s special motion to strike substantively lacked
merit, which was the basis for the denial of fees.

            Our review of the special motion to
strike is de novo.  “We review the record
independently to determine whether the asserted cause of action arises from
activity protected under the statute and, if so, whether the plaintiff has
shown a probability of prevailing on the merits.”  (Stewart
v. Rolling Stone, LLC (2010) 181 Cal.App.4th 664, 675; accord, >Soukup v. Law Offices of Herbert Hafif
(2006) 39 Cal.4th 260, 269, fn. 3.)

            Section 425.16 provides, in relevant
part:  “A cause of action against a
person arising from any act of that person in furtherance of the person’s 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.”  (>Id., subd. (b)(1).)

            In resolving a special motion to
strike under section 425.16, the court engages in a two-step analysis.  The court must first determine whether the
moving defendant “has made a threshold showing that the challenged cause of
action is one arising from protected activity.” 
(Navellier v. Sletten (2002)
29 Cal.4th 82, 88 (Navellier).)  If the court determines the defendant met
this initial burden, “it must then determine whether the plaintiff has
demonstrated a probability of prevailing on the claim.”  (Ibid.)  “In making its determination, the court shall
consider the pleadings, and supporting and opposing affidavits stating the
facts upon which the liability or defense is based.”  (§ 425.16, subd. (b)(2).)  Only those causes of action that satisfy “>both prongs” of section 425.16,
i.e., arise from protected activity and lack minimal merit, are subject to
being stricken under the statute.  (>Navellier, at p. 89.)

1.                 
Step One—Act in Furtherance

            An act in furtherance of a person’s
right to petition or of free speech is defined by statute to include “any written
or oral statement or writing made before a . . . judicial proceeding, or . . .
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).)  Where a party moves to strike a cause of
action under subdivision (e)(1) or (e)(2) of the statute, that party “need >not separately demonstrate that the
statement concerned an issue of public significance.”  (Briggs
v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th 1106, 1123 (>Briggs).)

            Plaintiff moved to strike
defendant’s libel cause of action on the grounds the allegedly defamatory
statements were prelitigation statements made in connection with a judicial
proceeding.  It is well established that
statements made in anticipation of
litigation may qualify for protection under section 425.16, subdivision (e)(1)
or (e)(2), as statements or writings made in connection with a judicial
proceeding.  As our Supreme Court has
explained:  â€œ ‘[j]ust as communications
preparatory to or in anticipation of the bringing of an action or other
official proceeding are within the protection of the litigation privilege of
Civil Code section 47, subdivision (b) [citation], . . . such statements are equally entitled to the benefits of section 425.16.’
 [Citations.]”  (Briggs,
supra, 19 Cal.4th at p. 1115, italics
added; accord, Digerati Holdings, LLC v.
Young Money Entertainment, LLC (2011) 194 Cal.App.4th 873, 887-888 (>Digerati) [prelitigation letter sent to
exhibitors of documentary film regarding alleged wrongful distribution of film
qualified for protection under section 425.16]; Dove Audio, Inc. v. Rosenfeld, Meyer & Susman (1996) 47
Cal.App.4th 777, 784 [letter to private individuals regarding proposed
complaint to Attorney General was within “the shelter” of section 425.16].)

            “Accordingly, although litigation
may not have commenced, if a statement ‘concern[s] the subject of the dispute’
and is made ‘in anticipation of litigation “contemplated in good faith and
under serious consideration” ’ [citations] then the statement may be
petitioning activity protected by section 425.16.”  (Neville
v. Chudacoff (2008) 160 Cal.App.4th 1255, 1268 [prelitigation letter to customers
regarding former employee’s improper contact and disclosure of trade secrets].)

            Here, defendant’s libel claim was
primarily based on the prelitigation cease and desist letter outlining the
allegedly wrongful conduct by defendant, and indicating that if such conduct
did not cease, a lawsuit seeking to enjoin such conduct and seeking damages
would be filed.  The four-page,
single-spaced letter sets out in detail the conduct which plaintiff believed
had been occurring based on communications from clients (improper solicitation
of clients), as well as other information discovered by Grant on company
computers after defendant resigned (retention of proprietary business
information).  Grant, in support of the
motion, attested that if defendant’s wrongful conduct had not stopped after issuance
of the cease and desist letter, he would have authorized counsel to file a
lawsuit on behalf of plaintiff.   

            Defendant argued, and the trial
court found, the cease and desist letter did not qualify for protection as a
prelitigation communication under section 425.16 because plaintiff did not sue
defendant for misappropriation of trade secrets but instead sued on claims to
recover the unpaid debt.  The court reasoned
that since plaintiff did not file a lawsuit on the potential claims asserted in
the cease and desist letter, and the cease and desist letter did not mention
the unpaid debt that was the subject of the pending lawsuit, the letter was not
protected speech.

Defendant led the trial court into error by arguing the cease and
desist letter lost its protected status simply because plaintiff ultimately
decided not to sue plaintiff on the potential claims asserted in that
letter.  On appeal, defendant
acknowledges the letter was a cease and desist letter -- it plainly is -- and
the letter, read together with Grant’s declaration, show the letter was sent in
anticipation of litigation.  The Grant declaration
explained plaintiff did not file an unfair competition lawsuit because
plaintiff received assurances that no confidential information would be used.  “Both section 425.16 and Civil Code section
47 are construed broadly, to protect the
right of litigants to ‘ “the utmost freedom of access to the courts without
[the] fear of being harassed subsequently by derivative tort actions.” ’  [Citations.]”  (Healy
v. Tuscany Hills Landscape & Recreation Corp. (2006) 137 Cal.App.4th 1,
5 (Healy), italics added.)

            The only reasonable inference from
the foregoing is that plaintiff was contemplating litigation against defendant,
and possibly CAPS, seriously and in good faith, when the cease and desist letter
was written and served.  Simply because
plaintiff ultimately satisfied itself that a breach of contract or misappropriation
claim need not be formally pursued does not take the cease and desist letter
outside the protection of section 425.16. 
(See, e.g., Aronson v. Kinsella
(1997) 58 Cal.App.4th 254, 271-272 [absolute litigation privilege applied to
protect statements made in prelitigation letter where opposing party
substantially conformed behavior after receipt of letter and lawsuit was
therefore not filed].)  The proper focus
for both section 425.16 and the litigation privilege is whether the proposed
lawsuit was seriously considered in good faith, not on whether a civil claim is
ultimately filed and pursued to resolution. 
The court erred in finding that plaintiff had failed to discharge its
burden in establishing the first prong of the statute.href="#_ftn1" name="_ftnref1" title="">[1]

>2.                 
Step Two—Probability of Prevailing

To defeat a section 425.16 motion, the opposing party must state and
substantiate a legally sufficient claim. 
(Navellier, >supra, 29 Cal.4th at p. 88; see also >Oasis West Realty v. Goldman (2011) 51
Cal.4th 811, 820.)  Here, defendant filed
a nonopposition and an amended cross-complaint dismissing the libel claim.  Defendant offered no evidence to contradict
Grant’s testimony or otherwise establishing the viability of the libel claim.

Moreover, the record supports a finding the libel claim would not
have been meritorious as it was based primarily on statements in the cease and
desist letter which are protected from derivative liability by the litigation
privilege.  (Digerati, supra, 194
Cal.App.4th at p. 888 [“A plaintiff cannot establish a probability of
prevailing if the litigation privilege precludes the defendant’s liability on
the claim.”]; see also Healy, >supra, 137 Cal.App.4th at p. 5.)  The trial court erred in finding plaintiff
had failed to make the requisite showing to be deemed a prevailing party on its
special motion to strike for purposes of a statutory fee award.

3.                 
The Fee Request

Section 425.16, subdivision (c) provides that a prevailing party on
a special motion to strike “shall be entitled to recover his or her attorney’s
fees and costs.”  Where the requisite
showing is made, a reasonable fee award is mandatory. 

            “[T]here are three ways in which a
party may seek an award of attorney fees and costs in connection with a special
motion to strike under section 425.16. 
The party filing such a motion may seek attorney fees in its moving
papers, or the party prevailing on the motion may bring a separate, subsequently
filed motion for fees and costs. 
[Citations.]  ‘The party
prevailing on the special motion to strike can also seek its attorney fees as
part of a cost memorandum at the conclusion of the litigation.  [Citations.]’  [Citation.]”  (Carpenter
v. Jack in the Box Corp. (2007) 151 Cal.App.4th 454, 468, italics omitted.)

            Under the statutory scheme and
applicable law, plaintiff was entitled to seek an award of statutory fees by
subsequent noticed motion.  To the extent
the trial court’s repeated reference in its written ruling to an “unknown”
amount of attorney fees suggests the court believed otherwise, the court was in
error.  On remand, the court shall allow
the parties to properly brief the attorney fee issue and shall conduct a
hearing related thereto.

>DISPOSITION

            The trial court’s August 29, 2012 order denying plaintiff’s request for statutory attorney fees in
connection with its special motion to strike is reversed.  The action is remanded to the trial court
with directions to conduct further proceedings consistent with this opinion,
including allowing briefing from the parties on plaintiff’s request for fees related
to the presentation of its special motion to strike, and the holding of a
hearing thereon.  Plaintiff and appellant
shall also recover costs and attorney fees on appeal pursuant to section
425.16, subdivision (c), in an amount to be determined by the trial court.  (Huntingdon
Life Sciences, Inc. v. Stop Huntingdon Animal Cruelty USA, Inc. (2005) 129
Cal.App.4th 1228, 1267.)

 

                                                                                                GRIMES,
J.

 

We concur:

 

                                    BIGELOW, P. J.

 

 

                                    FLIER, J.