Hayes v.
Filed 1/24/13 Hayes v. Hutchinson CA2/4
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 This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115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 FOUR
DANIEL
B. HAYES et al.,
Plaintiffs and Respondents,
v.
PAUL
HUTCHINSON et al.,
Defendants and Appellants.
B237556
(Los Angeles County
Super. Ct. No. BC462930)
APPEAL from a judgment of the Superior
Court for Los
Angeles County, Alice E. Altoon, Judge.
Affirmed in part, reversed in part.
Clair G. Burrill; Alison Minet Adams;
Law Offices of Robert S. Besser and Robert S. Besser and for Defendants and
Appellants.
Kinsella Weitzman Iser Kump &
Aldisert, Lawrence Y. Iser and Gregory S. Gabriel for Plaintiffs and
Respondents.
Defendants Paul Hutchinson and Paul
Hutchinson, Inc. (we will refer to both defendants, collectively, as Hutchinson) appeal from the denial of their
special motion to strike and the imposition of attorney fees as sanctions under
Code of Civil Procedure section 425.16, the anti-SLAPP statute.
that Hutchinson failed to establish that the causes of action alleged by
plaintiffs Daniel B. Hayes (Hayes) and Davis Shapiro Lewit & Hayes, LLP
(the law firm) arose from conduct protected under section 425.16. Therefore, we affirm the trial court’s order
denying Hutchinson’s special motion to strike.
We also conclude, however, that the trial court abused its discretion by
imposing sanctions, inasmuch as the court repeatedly stated during argument on
the motion that Hutchinson’s motion was not “completely
frivolous,†and it did not provide any findings to support the order. Accordingly, we reverse the order imposing
sanctions under section 425.16.
BACKGROUND
Hayes and the law firm represented the
musical group Linkin Park (the Band) with respect to its
activities in the entertainment industry.
In June 2002, Hayes negotiated a new recording agreement between Warner
Brothers (WB) and the Band. Under that
agreement (the 2002 Agreement), WB was allowed to modify the manner in which
royalties would be calculated, so long as the change was “pennies neutral†--
i.e., the change would not have a negative effect on the royalties WB paid to
the Band.
In May 2003, WB notified the Band that
it was changing the manner in which it would calculate royalties. WB provided example calculations showing that
the change would be pennies neutral for royalties from sales of compact discs,
and that royalties from digital downloads would increase. The in-house auditor at the Band’s business
management firm confirmed that WB’s calculations were correct.
Hayes and the law firm negotiated a
new recording agreement between the Band and WB in 2005, to become effective in
2006 (the 2006 Agreement). According to
Hayes, royalties were improved under the 2006 Agreement, and the Band received
a multi-million dollar advance against those royalties.
In June 2009, the Band hired Hutchinson to conduct a royalty audit of
WB. As part of his work on the audit, Hutchinson reviewed the 2002 Agreement and the
2006 Agreement. Based upon his review of
the agreements, Hutchinson concluded that changes made to the
manner in which royalties were calculated under the 2006 Agreement resulted in
substantially less royalties to the Band.
Hutchinson met with Hayes in February 2010 to discuss his belief that
the Band was receiving lower royalties under the 2006 Agreement than it
received under the 2002 Agreement. Hutchinson told Hayes that the changes with
regard to royalties for digital downloads in the 2006 Agreement (which changes,
according to Hayes, were originally implemented by WB in 2003) were not pennies
neutral compared to the 2002 Agreement, but instead resulted in reduced
royalties.
Hayes asked Hutchinson not to raise the reduction in
royalty issues with WB, because those issues were outside the scope of his
audit and because Hayes was at that time involved in sensitive negotiations
with WB on the Band’s behalf.
Eventually, Hutchinson told Hayes that if Hayes did not
inform the Band about the royalty issues, Hutchinson would do so. After consulting with the Band’s business
manager, Hayes terminated Hutchinson on March 29,
2010.
In early April 2010, Hutchinson’s attorney, Clair Burrill, arranged
a meeting between Hutchinson (accompanied by Burrill) and two
members of the Band, who were accompanied by an attorney, Fred Rucker. Hutchinson told those present about his
audit, what he discovered about the changes to the royalties, and how Hayes had
responded when Hutchinson told him about his discovery. After the meeting, Rucker told Hutchinson
that the Band wanted him to complete the WB royalty audit. Subsequently, in May 2010, Rucker hired
Hutchinson “to conduct an examination of certain audit related claims, including a comparison of the effect
of changes from the [2002 Agreement] to the [2006 Agreement] on the amount of
income generated or to be generated from the [2006 Agreement for a certain
period of time] . . . and to prepare and present an evaluation report of those
claims for [Rucker’s] use on behalf of . . . [the Band].â€
Hutchinson provided the evaluation report
to Rucker in late July 2010. The report
details the differences between the royalty terms in the 2002 Agreement and the
2006 Agreement, and the financial impact of those changes (i.e., comparing the
royalties the Band earned and was expected to earn under the 2006 Agreement
with what the Band would have earned if the royalties were calculated under the
terms of the 2002 Agreement). The report
ended with the following “Summaryâ€: “The
impact on the royalties paid to [the Band], following the 2006 renegotiation,
is a significant decline in all the digital unit royalty rates, when in fact
the situation during these renegotiations was very much in favor of [the Band]
getting a reasonably good improvement on their unit royalty rates. In my opinion, this was an incredibly
unfavorable renegotiation for [the Band] and, in my view, this was due to a
lack of care and effort by Danny Hayes and his staff in not properly reading
and checking the draft agreements submitted by [WB]. Further, in my view, this goes beyond mistake
to incompetence, which incompetence is exacerbated by the following. When I raised these issues regarding the 2006
Agreement to Danny Hayes, he first tried to ‘persuade’ me to exclude them from
my report. When I refused, he had a
discussion with [WB] and sent me an e-mail that stated ‘I spoke with WB today
about the 2 big issues and promised that I would craft the claim language in
advance with them’. When I objected to
this ludicrous suggestion, I was fired.
Lastly, in my view, Danny Hayes gives lawyers a bad name. I am sure he was handsomely compensated for
his efforts in connection with the 2006 renegotiations and that is a
shame. In fact, the renegotiations resulted
in improvements for [WB] and income to Danny Hayes (and perhaps continuing
income on some basis) all at the expense of the artist, [the Band].â€
The Band terminated Hayes and the law
firm on July 30, 2010, shortly after receiving the report. Hayes and the law firm filed the instant
action against Hutchinson less than a year later. The operative first amended complaint alleges
claims for defamation, trade libel, and intentional interference with
contractual relations based upon statements Hutchinson made in the evaluation
report.
Hutchinson filed a special motion to
strike under section 425.16, arguing that his statements in the report were
protected because the report was prepared in anticipation of litigation. Hutchinson submitted his declaration in
support of the motion setting forth the background facts and describing how he
came to draft his report. In describing
his initial meeting with Rucker and members of the Band, he stated that Rucker
told him “he was an attorney that specializes in legal malpractice litigation
and had been retained by [the Band] to assist them with the Hayes matter.†Hutchinson also stated that he was “hired
directly by Fred Rucker to give him my expert opinion as to the potential
damages claims arising out of a comparison of the effect of changes from the
2002 Agreement to the renegotiated 2006 Agreement on the amount of income
generated from . . . all relevant income sources.†Finally, he declared that Rucker “explained
that he intended to use my expert opinion report in preparation for litigation
against Hayes.â€
In opposing the motion, Hayes and the
law firm contended that the statements at issue were not protected under
section 425.16 because no litigation was contemplated at the time the
statements were made. They submitted,
among other things, declarations from Rucker, two members of the Band (who
served on what the Band referred to as the “legal and finance committeeâ€), the
Band’s business manager, and two other managers for the Band.
In his declaration, Rucker stated that
when he and members of the Band met with Hutchinson, Hutchinson gave him
materials that he contended supported his concerns about the 2006
Agreement. According to Rucker, over the
course of subsequent meetings, Hutchinson offered to prepare a report
explaining his concerns regarding Hayes’ negotiations of the Band’s recording
agreements. Rucker stated that he and
the Band agreed to have Hutchinson prepare the report, which would allow the
Band to understand and consider Hutchinson’s concerns. Rucker denied telling Hutchinson that he
(Rucker) had been retained by the Band to assist in potential litigation
against Hayes, or that he intended to use the report in preparation for
litigation against Hayes. He also
declared that no member of the Band ever told Hutchinson (or his attorney) in
Rucker’s presence that the Band was contemplating litigation against Hayes, nor
did he see any written communication from members of the Band indicating that
they were contemplating such litigation.
The two band members, Brad Delson and
Rob Bourdon, declared that in their capacity as members of the legal and
finance committee, they help oversee the business and legal affairs of the
Band. They both stated that they asked
Hutchinson to prepare the report “in order to gather facts and understand the
basis for Mr. Hutchinson’s concern that our royalties under the [2006
Agreement] decreased.†They declared
that they were “not imminently planning to make any formal claim against Danny
Hayes,†they did not know of any members of the Band who had such plans, and
they did not tell Hutchinson that the Band was seriously contemplating imminent
plans to bring an action against Hayes.
The Band’s business manager, Jonathan
Schwartz, and two other managers, Michael Green and Jordan Berliant, made
similar statements in their declarations.
All of them declared that the report was prepared to detail Hutchinson’s
concerns of alleged decreased royalties under the 2006 Agreement and to enable
the Band and its corporate organization to understand and consider those
concerns. They also stated that “at no
time was there any serious contemplation or consideration within the Linkin
Park organization of imminent, or even probable, litigation against Danny
Hayes, who was a trusted representative and advisor of the band for more than
ten years.â€
In response to these declarations,
Hutchinson submitted an additional declaration with his reply in support of the
motion. He reiterated that Rucker told
him that he was a legal malpractice attorney and that “he wanted an expert
opinion as to the damage claims.†Hutchinson
also declared that Rucker “insisted that my services be provided directly to
him and not to [the Band] so that he could preserve the effect of the work
product doctrine.†He attached as an
exhibit a copy of an e-mail Rucker sent to Hutchinson’s attorney confirming
this.
separate damages analysis was to be my expert opinion as to the damage claims
and that the same was being provided to Fred Rucker in anticipation of and preparation
for litigation and would be protected by the work product doctrine. With that assurance, I provided a
straightforward opinion as to the damage claims.â€
The trial court denied the special
motion to strike. It found “that the
defendants did not meet the burden of demonstrating that the report was
prepared in anticipation of imminent litigation and therefore it is not
protected under section 425.16.†The
court also ordered Hutchinson to pay attorney fees as sanctions in the amount
of $19,500. Hutchinson timely filed a
notice of appeal from the court’s order.
DISCUSSION
On appeal, Hutchinson argues that the
trial court erred by denying the special motion to strike because the report
falls within the protection of section 425.16 because: (1) it was prepared in anticipation of
litigation and therefore is protected by the
Code section 47, subdivision (b); (2) it falls within the common interest
privilege set forth in Civil Code section 47, subdivision (c); (3) it is
protected under the First Amendment because it reflects Hutchinson’s opinions;
and (4) it is protected by a purported accountants’ privilege. In addition, Hutchinson contends that: (1) the trial court erred by sustaining the
objections to Rucker’s e-mail, which Hutchinson submitted in support of his
assertion that he prepared the report in anticipation of litigation; (2) Hayes
and the law firm failed to produce evidence to establish a probability of prevailing
on their claims; and (3) the attorney fee award must be reversed because the
special motion to strike was not frivolous and the trial court failed to make
the required factual findings to support the imposition of sanctions.
A.
We begin with Hutchinson’s challenge
to the trial court’s evidentiary ruling, since it affects the evidence to be
considered when determining whether Hutchinson satisfied his burden to show
that the report is protected under section 425.16 because it was prepared in
anticipation of litigation.
Hutchinson attached as an exhibit to
his reply declaration filed in support of the special motion to strike an
e-mail purportedly sent from Rucker to Hutchinson’s attorney, Burrill. Hayes and the law firm filed written
objections to the e-mail on several grounds, including that it lacked
foundation and was not properly authenticated, that it constituted inadmissible
hearsay, and that it was new evidence submitted with a reply brief without
providing Hayes and the law firm notice and an opportunity to respond. The trial court sustained the
objections.
On appeal, Hutchinson contends the
trial court erroneously sustained Hayes’ and the law firm’s objection to the
e-mail on hearsay grounds, and argues that the e-mail was admissible hearsay
under Evidence Code section 1224, as an admission against interest, or because
it was offered to show the terms of his engagement not contradicted by any
writing between the parties. We need not
determine whether the e-mail is admissible hearsay, however, because we
conclude the e-mail was not properly authenticated. Hutchinson was not an addressee of the
e-mail, and his declaration did not include any information indicating that he
personally received it; he merely declared that a true copy of the e-mail was
attached to the declaration. That is not
proper authentication. (
California (2005) 134 Cal.App.4th 224, 244.) Therefore, the trial court did not abuse its
discretion by sustaining the objection on the ground that it was not properly
authenticated. (Hall v. Time Warner, Inc. (2007) 153 Cal.App.4th 1337, 1348
[evidentiary rulings on special motion to strike reviewed for abuse of
discretion].)
B. Hutchinson
Did Not Meet His Burden To Establish The Report Was
Protected Under Section 425.16
“Section 425.16 . . . was enacted ‘to
provide a procedural remedy to dispose of lawsuits that are brought to chill
the valid exercise of constitutional rights.’
[Citation.] The statute provides
that ‘[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.’
(§ 425.16, subd. (b)(1).) It
defines ‘“act in furtherance of a person’s right of petition or free speech
under the United States or California Constitution in connection with a public
issueâ€â€™ to include ‘(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, or (4)
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).)†(
Cal.App.4th 1152, 1158-1159.)
“‘“[S]ection 425.16 requires that a
court engage in a two-step process when determining whether a defendant’s
anti-SLAPP motion should be granted.
First, the court decides whether the defendant has made a threshold
showing that the challenged cause of action is one ‘arising from’ protected
activity. [Citation.] If the court finds such a showing has been
made, it then must consider whether the plaintiff has demonstrated a
probability of prevailing on the claim.â€â€™
[Citation.] ‘Only a cause of
action that satisfies both prongs of
the anti-SLAPP statute -- i.e., that arises from protected speech or petitioning
and lacks even minimal merit -- is a
SLAPP, subject to being stricken under the statute.’ [Citation.]
Thus, if the defendant fails to satisfy the first step, the court need
not address the second step, and must deny the special motion to strike. We review the denial of a special motion to
strike de novo. [Citation.]†(Aguilar
v. Goldstein, supra, 207
Cal.App.4th at p. 1159.)
“In our evaluation of the trial
court’s order, we consider the pleadings and the supporting and opposing
affidavits filed by the parties on the anti-SLAPP motion. In doing so, we do not weigh credibility or
determine the weight of the evidence.
Rather, we accept as true the evidence favorable to the plaintiff and
evaluate the defendant’s evidence only to determine if it has defeated that
submitted by the plaintiff as a matter of
law.†(Bailey v. Brewer (2011) 197 Cal.App.4th 781, 788.)
As noted, Hutchinson argues that the
statements in the report, upon which all the causes of action are based, are
protected by the litigation privilege, the common interest privilege, the First
Amendment, and the accountants’ privilege, and therefore section 425.16
applies. We conclude he did not meet his
burden to establish that section 425.16 applies to the statements.
1.
Hutchinson argues that section 425.16
applies because the report was prepared in anticipation of litigation and
therefore is subject to the litigation privilege under Civil Code section 47,
subdivision (b). Although the
protections of the litigation privilege and section 425.16 are not identical,
the California Supreme Court has recognized there is a relationship between
them. As the Supreme Court has
explained, courts “have looked to the litigation privilege as an aid in
construing the scope of section 425.16, subdivision (e)(1) and (2) with respect
to the first step of the two-step anti-SLAPP inquiry -- that is, by examining
the scope of the litigation privilege to determine whether a given communication
falls within the ambit of subdivision (e)(1) and (2).†(Flatley
v. Mauro (2006) 39 Cal.4th 299, 322-323.)
“The litigation privilege, codified at
Civil Code section 47, subdivision (b), provides that a ‘publication or
broadcast’ made as part of a ‘judicial proceeding’ is privileged.†(Action
Apartment Assn., Inc. v. City of Santa Monica (2007) 41 Cal.4th 1232,
1241.) “Although the express language of
[Civil Code] section 47[, subdivision] (b) applies only to communications made
proceeding, courts have applied the privilege to some communications made
litigation.†(Eisenberg v. Alameda Newspapers, Inc. (1999) 74 Cal.App.4th 1359,
1378 (Eisenberg); see also
1194; Edwards v. Centex Real Estate Corp.
(1997) 53 Cal.App.4th 15, 30-37 (Edwards).) The privilege applies in the pre-litigation
context “‘only when the communication has some relation to a proceeding that is
contemplated in good faith and under serious consideration. The bare possibility that the proceeding
might be instituted is not to be used as a cloak to provide immunity for
defamation when the possibility is not seriously considered.’†(Eisenberg,
supra, 74 Cal.App.4th at p.
1378.)
As the court in Edwards noted when addressing when on the continuum between the
mere possibility of a lawsuit and the reality of a filed lawsuit the privilege
would attach, “[i]n the present litigious society, there is always at least the
potential for a lawsuit any time a
dispute arises between individuals or entities.†(Edwards,
supra, 53 Cal.App.4th at p. 33.) Thus, “[m]ore than a mere possibility or
vague ‘anticipation’ of litigation must be required for the privilege to
attach, or else the privilege may be misused in ways for which there is no
public policy justification or purpose.â€
(Ibid.) The court concluded that, to avoid such
misuse, “the parameters of the privilege must be defined by the reasons
providing justification for its existence.â€
(Ibid.) Pointing to the Supreme Court’s explanation
that “the privilege is based on a policy of encouraging free access to the courts for assistance in the resolution of
disputes and the ascertainment of truth, without fear of incurring a derivative
tort action†(ibid., citing
205), the Edwards court concluded
that “[t]his rationale for the privilege cannot logically be extended to
communications made prior to or
prospect of litigation has gone from being a mere possibility to becoming a
contemplated reality†(
Thus, the court held that the litigation privilege for pre-litigation
communications “only arises at the point in time when litigation is no longer a
mere possibility, but has instead ripened into a proposed proceeding that is actually contemplated in good faith and
under serious consideration as a means of obtaining access to the courts for
the purpose of resolving the dispute.†(
In the present case, Hutchinson filed
declarations stating that he believed his report was going to be used in
preparation for litigation against Hayes.
Hutchinson that he had been retained by the Band to assist in litigation
against Hayes or that he intended to use Hutchinson’s report in preparation for
litigation against Hayes. Members of the
Band’s legal and finance committee, as well as the Band’s business manager and
two other managers, also declared that the Band never was seriously
contemplating filing a lawsuit against Hayes, and no one from the Band informed
Hutchinson that it was contemplating such a lawsuit. All of them declared that the purpose of Hutchinson’s
report was to allow the members of the Band and its management team to
understand Hutchinson’s concerns about the decreased royalties the Band would
receive under the 2006 Agreement.
We note that a trier of fact could
believe Hutchinson and disbelieve Rucker as to what Rucker told Hutchinson, and
conclude that Hutchinson reasonably believed that litigation was seriously
contemplated in good faith, even if the Band itself did not actually
contemplate litigation. In such an
event, the litigation privilege might apply.
(See Edwards,
[noting difference in language of comments to sections of the Second
Restatement of Torts dealing with litigation privilege as to potential parties
to a lawsuit and potential witnesses].)
But on a special motion to strike, where it is the defendant’s burden to establish that the complaint arises from
activity that is protected under section 425.16 (Aguilar v. Goldstein, supra,
207 Cal.App.4th at p. 1159), this conflict in the evidence precludes a finding
that the complaint arises from activity protected under the litigation
privilege. (See Bailey v. Brewer, supra,
197 Cal.App.4th at p. 788 [court does not weigh evidence, but must accept
plaintiff’s evidence as true and determine whether defendant’s evidence defeats
plaintiff’s evidence as a matter of law].)
Therefore the trial court correctly found that Hutchinson failed to meet
his burden to the extent he relies upon the litigation privilege.
2.
Hutchinson argues for the first time
on appeal that his statements are protected under section 425.16 because they
fall under the common interest privilege codified in Civil Code section 47,
subdivision (c)(3). He contends he may
raise this issue, even though he did not raise it in the trial court, because
it is a question of law. (Citing
221 Cal.App.3d 1294, 1299, fn. 3.) He is
mistaken.
Civil Code section 47, subdivision (c)
provides that a privileged publication is one made “[i]n a communication,
therein, (1) by one who is also interested, or (2) by one who stands in such a
relation to the person interested as to afford a reasonable ground for
supposing the motive for the communication to be innocent, or (3) who is requested
by the person interested to give the information.†(Italics added.) Whether Hutchinson’s statements were made
without malice is an issue of fact, and is hotly disputed in this case. Therefore, Hutchinson cannot raise this new
theory for the first time on appeal. (
(1998) 67 Cal.App.4th 1509, 1527, fn. 3 [“A party may not raise a new theory
for the first time on appeal when that newly raised theory involves facts open
to controversy but not placed in issue or resolved at trialâ€].)
3.
Hutchinson argues his report is
protected under section 425.16 because it is privileged under the
First Amendment claim to the requirements of section 425.16. Section 425.16 does not apply to causes of
action arising from any act in
furtherance of a person’s right of free speech.
It applies only when that act is “in furtherance of the person’s right
of petition or free speech . . . in
connection with a public issue.â€
(§ 425.16, subd. (b)(1), italics added.) Unlike a special motion to strike based upon
section 425.16, subdivisions (e)(1) or (e)(2) -- i.e., when the complaint
arises from the defendant’s conduct in a judicial or official proceeding,
which, as we have concluded, the instant complaint does not -- when a special
motion to strike is based upon subdivisions (e)(3) or (e)(4), the defendant
must establish that the conduct upon which the cause of action arises was
conduct in connection with a public issue.
(§ 425.16, subds. (e)(3), (4); see Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th
1106, 1123.) Hutchinson does not address
this public issue requirement in his briefs on appeal, and we find no evidence
that his statements concerned an issue of public interest.
4. The
Accountants’ Privilege
Hutchinson’s argument that his special
motion to strike should have been granted because his statements are protected
under a purported accountant’s privilege consists of a single sentence –
“Accountants, such as Hutchinson, are afforded protection from damage actions
resulting from the accountant’s work in the nature of the protection afforded a
whistle blower†-- with citations to three cases that not only do not support
his assertion, but have no relation to the protection afforded under section
425.16. We deem the argument to have
been waived. (Badie v. Bank of America (1998) 67 Cal.App.4th 779, 784–785 [“When
an appellant fails to raise a point, or asserts it but fails to support it with
reasoned argument and citations to authority, we treat the point as waivedâ€].)
C.
Hutchinson challenges the trial
court’s award to Hayes and the law firm of $19,500 in attorney fees as
sanctions under section 425.16, subdivision (c)(1). We review orders awarding attorney fees under
that provision for abuse of discretion.
(Gerbosi v. Gaims, Weil, West
& Epstein, LLP (2011) 193 Cal.App.4th 435, 450.) Section 425.16 provides that, “[i]f the court finds that a
special motion to strike is frivolous or is solely intended to cause
unnecessary delay, the court shall award costs and reasonable attorney’s fees
to a plaintiff prevailing on the motion, pursuant to Section 128.5.†(§ 425.16, subd. (c)(1).) “Frivolous in this context means that any
reasonable attorney would agree the motion was totally devoid of merit.†(Gerbosi
v. Gaims, Weil, West & Epstein, LLP, supra, 193 Cal.App.4th at p. 450.)
In ruling on a party’s request for attorney fees under section 425.16,
the trial court must follow the procedures of section 128.5. (Decker
v. U.D. Registry, Inc. (2003) 105 Cal.App.4th 1382, 1392; see also
(2004) 32 Cal.4th 804, 817.) Under
section 128.5, the court must file a written order that “recite[s] in detail
the conduct or circumstances justifying the order.†(§ 128.5, subd. (c).)
In the present case, Hayes and the law
firm sought their attorney fees under section 425.16, subdivision (c)(1) on the
ground that Hutchinson’s special motion to strike was frivolous. At the hearing on the special motion, after
the court announced its ruling that Hutchinson did not meet his burden to show
that the report was prepared in contemplation of litigation, counsel for Hayes
and the law firm asked to address the issue of sanctions. The court responded by saying, “I don’t know
that it was completely frivolous, counsel.â€
Counsel for Hutchinson agreed, arguing the motion was not at all
frivolous. He noted that Hutchinson
stated under penalty of perjury that Rucker told him to prepare the report for
his use in preparation for litigation, and observed, “Mr. Rucker says one
thing. Mr. Hutchinson says another
thing. That’s not frivolity.†The court agreed, saying: “Yes.
That’s the problem. It’s an issue
of fact and I don’t have them in front of me.â€
The court then noted there was “an interesting shift in the reply that
is very noticeable, counsel, in terms of the grounds,†but concluded by saying
“[b]ut I don’t find it completely frivolous, counsel.†Nevertheless, the court immediately began to
address the amount of attorney fees Hayes and the law firm incurred. Hutchinson’s counsel interjected, saying, “As
you say, Your Honor, there’s nothing frivolous about this motion.†The court responded: “Well, I don’t know that it’s nothing. But it’s not completely frivolous, counsel,
is what I said. And it is troublesome
that the reply declaration changes tack.
In any event, I will be awarding the 19,500 in sanctions.†The only reference to the award in the
court’s minute order on the motion was the following: “Court orders sanctions in the amount of
$19,500.00 payable within 20 days of this date.â€
On appeal, Hutchinson argues that the
award of attorney fees was contrary to the trial court’s own statements at the
hearing on the motion that the motion was not “completely frivolous,†and that
the trial court’s order fails to include the findings required to award
sanctions. We conclude the trial court
abused its discretion by awarding sanctions.
As the court itself noted, there is a disputed issue of fact as to
whether Rucker told Hutchinson that he wanted the report for use in preparing
for litigation against Hayes – a key issue in determining whether the litigation
privilege applies. Moreover, the court’s
statements that Hutchinson’s motion was not completely frivolous necessarily
precludes a finding, required to award sanctions under section 425.16, that
“the motion is ‘totally and completely without merit.’†(Decker
v. U.D. Registry, Inc., supra, 105 Cal.App.4th p. 1392, quoting
§ 128.5, subd. (b)(2).) Therefore,
we reverse the order awarding sanctions against Hutchinson.
DISPOSITION
The order denying
Hutchinson’s special motion to strike under section 425.16 is affirmed. The order imposing sanctions is
reversed. The parties shall bear their
own costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
WILLHITE,
Acting P. J.
We concur:
MANELLA, J.
SUZUKAWA, J.
undesignated statutory references are to the Code of Civil Procedure.
and the law firm also argued they were likely to prevail on their causes of
action, and presented additional evidence to support their claims. In light of our conclusion that Hutchinson
failed to establish that the communications at issue are protected under
section 425.16, it is not necessary to address that evidence.
