CITIZENS OF HUMANITY, LLC, et al., Plaintiffs and Respondents, v. OSCAR RAMIREZ et al., Defendants and Appellants.
B299469 (Los Angeles County Super. Ct. No. 18SMCV00066)
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION FIVE
Filed 4/19/21
CERTIFIED FOR PUBLICATION
APPEAL from a judgment of the Superior Court of Los Angeles County, Elaine Mandel, Judge. Reversed and remanded with directions.
California Anti-SLAPP Project and Mark Goldowitz for Defendants and Appellants Oscar Ramirez and Law Offices of Oscar Ramirez.
Verum Law Group, Sam K. Kim and Yoonis J. Han for Defendants and Appellants Kevin Mahoney and Mahoney Law Group.
Mahoney Law Group, Kevin Mahoney and Joshua D. Klein for Defendant and Appellant Ana Jimenez.
Browne George Ross, Peter W. Ross and Charles Avrith for Plaintiffs and Respondents.
FACTUAL AND PROCEDURAL BACKGROUND
1. The Underlying Action
Because we resolve this appeal on the element of favorable termination, we focus our discussion of the underlying action on the facts and procedure
A. The Complaint
Ana Jimenez was an hourly employee of Oheck, LLC, making clothing for Citizens of Humanity, LLC. In May 2015, Jimenez brought suit against Oheck, Citizens of Humanity, and Eric Kweon (collectively, Oheck) alleging eight causes of action for wage and hour violations.1 Jimenez brought this action as an individual and on behalf of all other employees similarly situated. She also asserted a claim for civil penalties under the Private Attorney General Act (PAGA;
B. Jimenez Expresses Interest in Settlement
At a case management conference in January 2017, the court opened discovery on class issues only, and directed Jimenez to file her motion for class certification by September 29, 2017. Jimenez was deposed on April 27, 2017. The parties disputed whether Jimenez was to make herself available for a second day of deposition. At this point, according to Jimenez, she decided she did not want to pursue the case further and instructed her attorneys to attempt to resolve the case.2
C. Initial Settlement Negotiations Are Unsuccessful
The parties agreed to put discovery disputes on hold pending settlement negotiations. May 2017 e-mails between counsel show that both sides were agreeable to a settlement “on an individual basis,” which encompassed a payment to Jimenez and a dismissal without prejudice of the class claims. By
The record does not reflect any further settlement negotiations for approximately five months.
D. Issues Arise Regarding Class Notice and a Motion to Strike Class Allegations
An informal discovery conference was held on October 11, 2017. The parties were ordered to meet and confer regarding outstanding discovery issues, and the court directed that a notice be sent to the prospective class members by November 1, 2017.3 The parties could not agree on the terms of the notice, so, on October 19, 2017, they submitted a joint status report that attached their competing drafts of the notice. While Jimenez believed the court had “ordered” the notice be sent by November 1, 2017, Oheck believed that date was simply “suggested” by the court. Oheck planned to file a motion to strike class allegations, and proposed that the notice be delayed until resolution of its upcoming motion to strike.
On November 7, 2017, Oheck filed its motion to strike the class and PAGA claims, on the basis that Jimenez lacked standing to pursue them. Specifically, Oheck argued that Jimenez did not herself possess any wage and hour claims, so was unfit to be a class representative. Oheck further argued that the complaint could not be amended to find a more appropriate class representative, because Oheck‘s policies were compliant with the Labor Code, so “individual issues would predominate.”
E. The Matter Is Settled
On appeal, Oheck takes the position that, although Jimenez‘s individual claims were resolved by settlement agreement, the class claims were unilaterally voluntarily dismissed, prompted by Oheck‘s pending motion to strike the class claims. We therefore set forth the facts surrounding whether the parties’ settlement encompassed the class claims.
The record does not specifically reflect the date when settlement negotiations reopened, but by November 14, 2017, the parties had an agreement on the amount to be paid Jimenez and were working on a draft settlement agreement.
F. Oheck Withdraws Its Motion to Strike in Light of the Settlement
On December 4, 2017, Oheck filed a notice of withdrawal of its motion to strike the class claims. Oheck‘s motion stated that it withdrew the motion, “in light of the filing of Plaintiff‘s Notice of Settlement of Entire Case on November 20, 2017.”
G. The Terms of the Settlement Agreement
The settlement agreement was executed by all parties and counsel between November 30 and December 13, 2017. It provided for Oheck to pay Jimenez $50,000, with $15,000 of the amount to be paid to Jimenez and the remainder to her attorneys. Jimenez would dismiss her individual claims with prejudice and the class claims without prejudice. Dismissal was required before she would receive the settlement check.4 Jimenez also released all further claims arising from her employment.
H. Jimenez‘s Request for Dismissal and Court Approval
On January 4, 2018, Jimenez filed a request for dismissal of class action claims. In it, she sought dismissal of her individual claims with prejudice, and the class and PAGA claims without prejudice.
In language Oheck would later find significant, Jimenez‘s request, prepared by counsel, stated, “Ultimately, Plaintiff determined it would be in the best interests of the class to dismiss the class allegations and PAGA claims, without prejudice, thereby preserving the individual claims of the putative class members.” The document then has a heading reading, “SETTLEMENT OF INDIVIDUAL CLAIMS.” The first sentence under that heading reads, “After determining that the best interests of the class would be preserved by dismissing the class allegations and PAGA claims, the parties discussed a settlement of Plaintiff‘s individual claims.”5
On February 26, 2018, the court indicated its approval of the request to dismiss the class claims without prejudice and the individual claims with prejudice.
On March 9, 2018, the trial court dismissed the class action without prejudice and Jimenez‘s individual claims with prejudice.
2. The Current Action
A. The Complaint
On October 19, 2018 – some seven months later – Oheck filed the current action against Jimenez and one of her attorneys (Ramirez) who had represented her in the underlying action. On March 27, 2019, Oheck filed a Doe amendment naming Attorney Mahoney.6 The complaint alleged two causes of action. The first, against Jimenez and the attorneys, was for malicious prosecution of the underlying action. The second was against Jimenez alone, seeking sanctions against her under
As to malicious prosecution, Oheck alleged each element of the cause of action: First, that the underlying action was pursued without probable cause, as Jimenez had been properly paid all wages and had taken all breaks to which she was entitled; and, further, that Jimenez and her counsel were unaware of any other Oheck employee who had a viable wage and hour claim. Oheck alleged also that the underlying action was pursued maliciously, with the purpose of forcing a settlement unrelated to the merits of the claims
B. The Anti-SLAPP Motions
Jimenez, Attorney Ramirez and Attorney Mahoney each filed separate anti-SLAPP motions. The motions all argued that (1) the malicious prosecution action was based on conduct protected by the anti-SLAPP law, and (2) Oheck could not establish a probability of prevailing on its cause of action. Specifically, although not exclusively, they all argued that Oheck could not establish the “favorable termination” element of malicious prosecution, because the underlying action was actually resolved by settlement.
Oheck‘s opposition took the position that Jimenez‘s class claims and her individual claims were two different things – and explained that the action sought recovery for malicious prosecution only of the class claims. Oheck argued that the settlement agreement related only to the individual claims and posited that Jimenez and her counsel had actually decided to voluntarily dismiss the class claims before settlement was even discussed.
In reply, Jimenez and her counsel all argued that they had dismissed the class claims pursuant to the settlement.
At the hearing on the anti-SLAPP motions, the court indicated that Oheck had established a probability of prevailing on the elements of lack of probable cause and malice. Argument quickly turned to whether there was evidence of favorable termination, and, specifically, whether the class claims were encompassed by the settlement.7 Oheck relied heavily on the statements
the fact that the class claims were ultimately dismissed after Oheck filed its motion to strike the class claims. Jimenez and her counsel countered that, from early settlement negotiations in May 2017, it had been agreed that any settlement would encompass the voluntary dismissal of the class claims, but the class claims were not to be actually dismissed until the entire settlement was reached.
Jimenez and her attorneys argued that the court, in its assessment of favorable termination, should consider the action as a whole and not separate the individual and the class claims. Oheck‘s counsel did not directly respond, but again argued that the settlement agreement constituted a favorable termination for Jimenez on her individual claims, but it did not resolve the class claims “and did not insulate any of the attorney defendants from malicious prosecution.”
The court took the matter under submission. On June 17, 2019, the court issued its ruling denying the anti-SLAPP motions. Specifically, it found Oheck had established a prima facie case of malicious prosecution. As to the heavily disputed element of favorable termination, the court adopted Oheck‘s view of the settlement chronology. The court stated that, after Oheck filed its motion to strike the class claims, “[Jimenez and her attorneys] did not oppose that motion, but requested dismissal of the class claims without prejudice. After [they] agreed to dismiss the class claims, the parties resumed discussions regarding settlement of Jimenez‘s individual claims.” The court concluded that the voluntary dismissal of the class claims implied that “defeat [was] expected.”
Jimenez and her counsel filed timely notices of appeal.
Resolution of the appeal turns on whether Oheck has established a prima face case of the favorable termination element of malicious prosecution. The parties focus the bulk of their argument on the factual aspect of this issue, Oheck‘s position is that it has demonstrated a “probability of success” under the second prong of the anti-SLAPP statute (Baral v. Schnitt (2016) 1 Cal.5th 376, 384) because Jimenez dismissed the class claims unilaterally and voluntarily in the belief they were meritless, not that the claims were resolved as part of the settlement agreement.
We believe it is unnecessary to reach this issue. We conclude that in this precertification class action, the class claims are not severable from the individual claims for the purposes of the favorable termination analysis. The entire action terminated by settlement – a termination which was not favorable to Oheck as a matter of law.
1. Anti-SLAPP Law
“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 defendant‘s 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. [Citation.] 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 (2003) 31 Cal.4th 728, 733.)
The parties do not dispute that claims for malicious prosecution fall within the first prong. (See Citizens of Humanity, LLC v. Hass (2020) 46 Cal.App.5th 589, 598 (Citizens of Humanity).) We therefore turn to whether Oheck has demonstrated a probability of prevailing on its claim for malicious prosecution.
“This second step is a summary-judgment-like procedure. . . . We first determine whether [Oheck‘s] prima facie showing is enough to win a favorable judgment. . . . This threshold is ’ “not high.” ’ . . . Claims with minimal merit proceed. We accept [Oheck‘s] evidence as true and do not weigh evidence or resolve conflicting factual claims. . . . We may consider affidavits, declarations, and their equivalents if it is reasonably possible these statements will be admissible at trial. . . . [¶] After examining [Oheck‘s]
2. Elements of Malicious Prosecution
“An action for malicious prosecution has three required elements: ‘(1) the defendant brought (or continued to pursue) a claim in the underlying action without objective probable cause, (2) the claim was pursued by the defendant with subjective malice, and (3) the underlying action was ultimately resolved in the plaintiff‘s favor.’ [Citation.]” (Citizens of Humanity, supra, 46 Cal.App.5th at pp. 598–599.)
3. Oheck Cannot Establish Favorable Termination
A. Principles Governing Favorable Termination
We are concerned with the final element – that the underlying action was ultimately resolved in Oheck‘s favor. This can be seen as implicating two elements: termination of the entire action, and termination on the merits, reflecting innocence of the underlying defendants.
First, favorable termination requires favorable resolution of the underlying action in its entirety, not merely a single cause of action. (Crowley v. Katleman (1994) 8 Cal.4th 666, 686.) “[I]f the defendant in the underlying action prevails on all of the plaintiff‘s claims, he or she may successfully sue for malicious prosecution if any one of those claims was subjectively malicious and objectively unreasonable. But if the underlying plaintiff succeeds on any of his or her claims, the favorable termination requirement is unsatisfied and the malicious prosecution action cannot be maintained.” (Lane v. Bell (2018) 20 Cal.App.5th 61, 64.)
Second, the action must have been terminated on a basis which reflects upon the innocence of the underlying defendant. “A ’ “favorable” termination does not occur merely because a party complained against has prevailed in an underlying action. While the fact he has prevailed is an ingredient of a favorable termination, such termination must further reflect on his innocence of the alleged wrongful conduct. If the termination does not relate to the merits—reflecting on neither innocence of nor responsibility for the alleged misconduct—the termination is not favorable in the sense it
Cases have identified specific types of termination which are generally considered favorable and others which are generally considered unfavorable. A voluntary dismissal may or may not constitute a favorable termination. If the voluntary dismissal is an implicit concession that the dismissing party cannot maintain the action, it may constitute a dismissal on the merits which is a favorable termination. (JSJ Limited Partnership v. Mehrban (2012) 205 Cal.App.4th 1512, 1524 (JSJ).) “A voluntary dismissal is presumed to be a favorable termination on the merits, unless otherwise proved to a jury. [Citation.] This is because ’ “[a] dismissal for failure to prosecute . . . does reflect on the merits of the action [and in favor of the defendant] . . . . The reflection arises from the natural assumption that one does not simply abandon a meritorious action once instituted.” ’ [Citation.]” (Sycamore Ridge, supra, 157 Cal.App.4th at p. 1400.)
In contrast, a dismissal on technical or procedural, rather than substantive, grounds is not considered favorable for purposes of malicious prosecution. (JSJ, supra, 205 Cal.App.4th at p. 1525.) These include dismissals for lack of jurisdiction, for lack of standing, to avoid litigation expenses, or pursuant to settlement. (Ibid.) Generally, a dismissal resulting from a settlement does not constitute a favorable termination because the dismissal reflects ambiguously on the merits of the action. The purpose of a settlement is specifically to avoid a determination on the merits. (Dalany v. American Pacific Holding Corp. (1996) 42 Cal.App.4th 822, 827.) When litigation is terminated by agreement “there is ambiguity with respect to the merits of the proceeding and in general no favorable termination for purposes of pursuing a malicious prosecution action occurs. [Citations.]” (Id. at p. 828.) Even if the action was tried to a verdict, a subsequent bilateral settlement in which each side gave up something of value (reduced payment accepted in exchange for waiving right to appeal) defeats favorable termination as a matter of law.8 (Ferreira v. Gray, Cary, Ware & Freidenrich (2001) 87 Cal.App.4th 409, 412–413.)
B. The Class Claims Cannot Be Considered Separately
Oheck tries to avoid this result by parsing Jimenez‘s underlying complaint into two separate actions: her individual claims and her class claims. Pointing to the disputed facts surrounding whether the class claims were encompassed by the settlement, Oheck argues that it has established a probability of success because the class claims themselves were terminated in its favor. The argument is based on the unspoken premise that class claims are severable from individual claims for malicious prosecution purposes.9 (Cf. Sycamore Ridge, supra, 157 Cal.App.4th 1385 [attorneys were properly sued for maliciously prosecuting the claim of one of 45 individually named plaintiffs in the underlying action].)
The argument misconstrues the nature of a class action, and fails on both the “entire action” and the “on the merits” elements of favorable termination.
As to favorable termination of the entire action, Watkins v. Wachovia Corp. (2009) 172 Cal.App.4th 1576 establishes that there is no such thing as a separate class claim. In that case, Watkins brought a wage and hour class action. After the court denied her motion for class certification, she settled her individual claims, but purported to retain the right to appeal the denial of certification in her representative capacity. (Id. at p. 1581.) Division Three of the Second Appellate District
dismissed Watkins‘s appeal, on the basis that she had settled her wage and hour claim, which was indivisible. (Id. at p. 1588.) The court explained, “Watkins assumes, however, that her ‘class claim’ for unpaid overtime wages has independent vitality and can continue after she has settled her ‘individual claim’ for the same wages. The argument reflects a misunderstanding of the nature of a class action. A class action is a procedural device used ‘when the parties are numerous, and it is impracticable to bring them all before the court.’ [Citation.] In such a situation, ‘one or more may sue or defend for the
As in Watkins, Jimenez here possessed only a single claim for relief – her own. She did not also pursue class claims. The class action was no more than an ancillary procedure. We therefore do not separately consider whether the class claims were favorably terminated; Jimenez pursued a single claim for wage and hour violations, which was settled, on terms that included Oheck‘s payment of $50,000 to Jimenez.10
We reach the same result when we consider whether the class claims were resolved on the merits in Oheck‘s favor. Accepting Oheck‘s argument that the class claims were unilaterally dismissed, this establishes only a dismissal for procedural grounds, not on the merits. The class allegations were voluntarily dismissed without prejudice, and the court impliedly found the dismissal would not, in fact, prejudice the class members. Oheck suggests Jimenez voluntarily dismissed the class claims because she knew Oheck‘s pending motion to strike the class claims would be granted. But this does not render the dismissal a dismissal on the merits. Oheck moved to strike the class allegations on the basis that Jimenez was not an
appropriate class representative and that she could not be replaced because individual issues would predominate. In other words, Oheck challenged the procedure of Jimenez‘s
Both paths lead to the same result for the same reason. A precertification voluntary dismissal without prejudice of so-called “class claims” cannot constitute a favorable termination on the merits where, as here, the defendant agreed to pay the plaintiff a sum in exchange for the plaintiff‘s dismissal of her claims. A class action is merely a procedure by which a plaintiff can pursue her claim, not a separate claim that can be resolved on the merits independent of the plaintiff‘s own claim. The determination that the class action procedure is inapplicable in a particular case is not a resolution of the case on its merits, and does not constitute a favorable termination for malicious prosecution purposes.11
As the trial court did not rule on Jimenez‘s anti-SLAPP motion with respect to the second cause of action in Oheck‘s complaint against her, the trial court should consider the issue on remand.
DISPOSITION
The orders denying the anti-SLAPP motions are reversed. The matter is remanded to the trial court with directions to grant in their entirety the
As to Jimenez, the matter is remanded with directions to grant the anti-SLAPP motion to the first cause of action for malicious prosecution and to rule on Jimenez‘s anti-SLAPP motion to the second cause of action for violation of
Ramirez, Mahoney and Jimenez are awarded their costs and attorney‘s fees on appeal, in an amount to be set by the trial court.
RUBIN, P. J.
WE CONCUR:
BAKER, J.
KIM, J.
Notes
“THE COURT: Before I turn to the other side of the table for their response, let me ask you about the claims versus Jimenez personally, setting aside the claims against the lawyers. I think she stands in a slightly different circumstance than the lawyer defendants do.
“[OHECK‘S COUNSEL]: Yes.
“THE COURT: It seems to me that as to her, there was a termination in her favor. You paid her money.
“[OHECK‘S COUNSEL]: Right.
“THE COURT: Not you, but your client paid her money, paid her $50,000. How is that not a termination in her favor of at least her individual claims? [¶] Doesn‘t that preclude you from going after Ms. Jimenez personally for a malicious prosecution claim?
“[OHECK‘S COUNSEL]: It doesn‘t prevent us from going after her on 128.5 with respect to the workers’ comp claims, and I think, and I could be wrong, because I‘ve been in trial for about ten days, but I think that that‘s our only claim against her is on the 128.5 sanctions, and we did settle with her all her claims. [¶] We didn‘t give her a release of anything, she released us, but we settled, so that‘s not a favorable termination. But on 128.5 sanctions, we‘re not required to have a favorable termination. We‘re seeking sanctions based on what now appears to us to have been two frivolous workers’ comp claims where we paid out a total of a hundred thousand dollars.”
Neither the trial court in its ruling, nor any of the parties on appeal, addressed this apparent concession.