J. NILEY DORIT, Plaintiff and Respondent, v. JACK NOE, Defendant and Appellant.
A157433 (San Francisco County Super. Ct. No. CGC-19-572638)
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION FOUR
Filed 5/26/20
CERTIFIED FOR PUBLICATION
BACKGROUND
In January 2018, Noe hired Dorit to evaluate the medical records of Noe‘s deceased mother for a potential medical malpractice suit against her doctors. The parties signed a fee agreement in which Noe agreed to pay Dorit a $10,000 non-refundable retainer fee. This sum was intended to cover Dorit‘s time spent evaluating the claim, as well as “the costs of additional medical records and/or expert medical review if indicated.” The agreement contained an arbitration clause, which stated, “Should there arise any disagreement as to the amount of attorneys fees and/or costs, Client agrees to enter into binding arbitration of such issue or dispute before the Bar Association of San Francisco [(BASF)].”
On March 19, 2018, Dorit called Noe on the phone to present his analysis of the records. Noe cut Dorit off soon after Dorit began his presentation. Noe asked Dorit simply to provide his ultimate conclusion about the potential malpractice claim. Dorit said he did not think a malpractice claim was viable.
Following a hearing, the arbitrator awarded Noe nothing and allocated him the entire filing fee. Pursuant to the MFAA and the BASF‘s arbitration rules, the award was initially non-binding and either party could have requested a trial de novo in superior court. Because neither party requested a trial de novo, the award became binding by operation of law. (
A few months later, Dorit sued Noe in San Francisco Superior Court, alleging a single claim of malicious prosecution. Noe responded by filing a special motion to strike under
DISCUSSION
I. Legal background and standard of review
A. Anti-SLAPP law
The anti-SLAPP statute is designed to prevent meritless lawsuits from chilling individuals’ exercise of their rights of petition or free speech. (Wilson, supra, 7 Cal.5th at pp. 883–884.) “To that end, the statute authorizes a special motion to strike a claim ‘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.’ ([
We review the trial court‘s ruling on an anti-SLAPP motion de novo. (Flatley v. Mauro (2006) 39 Cal.4th 299, 325.)
B. Mandatory Fee Arbitration Act
The MFAA was enacted to eliminate a disparity in bargaining power between attorneys and clients attempting to resolve disputes about attorney‘s fees. (Schatz v. Allen Matkins Leck Gamble & Mallory LLP (2009) 45 Cal.4th 557, 564–565 (Schatz).) The Legislature recognized that many clients were infrequent consumers of legal services and would need to hire separate lawyers to litigate fee agreement disputes. (Id. at p. 564.) Proponents of the legislation at the time observed that the cost of a second lawyer was prohibitive because it would often equal or exceed the value of the fees in dispute. (Liska v. The Arns Law Firm (2004) 117 Cal.App.4th 275, 282 (Liska).) This in turn drove many clients to add malpractice claims to their fee disputes, which increased lawyers’ malpractice insurance rates. (Ibid.)
In response to these concerns from both clients and lawyers, the Legislature instructed the State Bar to establish and administer an effective, inexpensive system of arbitration for fee disputes before local bar associations. (Schatz, supra, 45 Cal.4th at pp. 564–565; Liska, supra, 117 Cal.App.4th at pp. 281–282.) In addition to avoiding the need for counsel by making proceedings simple and informal, the MFAA also “strictly limits the scope of the arbitration that the client may demand to the amount of the reasonable fees (or costs) to which the attorney is entitled.” (Liska, supra, 117 Cal.App.4th at p. 282.) Only fee disputes are subject to MFAA arbitration; arbitrators cannot award affirmative relief or damages against attorneys for negligence or professional misconduct except for a refund of unearned fees or costs. (Ibid.;
” ‘The nature of the obligation to arbitrate under the MFAA differs from that under standard arbitration in two important ways. First, the obligation to arbitrate under the MFAA is based on a statutory directive and not the parties’ agreement. Thus, a client may invoke the MFAA and proceed to arbitration despite the absence of any prior agreement to do so. . . . [¶]
An award in MFAA arbitration is presumed to be non-binding, and either party can request a trial de novo in superior court unless the party willfully failed to appear at the arbitration. (
II. Analysis
The trial court below ruled that Dorit‘s claim arose from Noe‘s protected petitioning activity but that Dorit had demonstrated his claim had more than minimal merit. Noe contends the trial court erred in the second portion of its analysis because his MFAA arbitration claim cannot support a malicious prosecution claim and Dorit failed to establish the other elements of the tort. Dorit disagrees and argues in addition that if an MFAA proceeding cannot support a malicious prosecution claim, then it also cannot qualify as protected activity for the purposes of the first step of the anti-SLAPP analysis. Accordingly, we will examine both steps of the anti-SLAPP analysis.
A. Step One: Claims arising from protected activity
A suit is subject to an anti-SLAPP motion if it arises 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.” (
Noe contends the MFAA arbitration he initiated qualifies as an “official proceeding authorized by law” because it was conducted pursuant to statute as part of a regulatory scheme. We agree that MFAA proceedings qualify as official proceedings because of their statutory basis and connection to State Bar regulation of attorneys.
“When nongovernmental entities are involved, courts have limited ‘official proceeding’ anti-SLAPP protection to (1) quasi-judicial proceedings that are part of a ‘comprehensive’ statutory licensing scheme and ‘subject to judicial review by administrative mandate’ (Kibler[, supra,] 39 Cal.4th [at p.] 200 [hospital peer review]), and (2) proceedings ‘established by statute to address a particular type of dispute.’ (Philipson [& Simon v. Gulsvig (2007)] 154 Cal.App.4th [347,] 358 [mandatory attorney fee arbitration]; see
Although MFAA arbitrations take place before local bar associations, which are private organizations, MFAA arbitrations qualify as official proceedings because they are both established by statute and part of the State Bar‘s comprehensive licensing scheme for attorneys. First, Philipson, which Dorit fails to address, is on point here. There, a law firm sued its client after, among other things, the client requested arbitration of a fee dispute under the MFAA before the Orange County Bar Association. (Philipson, supra, 154 Cal.App.4th at p. 353.) The court stated it had “little trouble concluding that the initiation of a State Bar sponsored fee arbitration proceeding” qualified as protected activity because the arbitration was “an official proceeding established by statute to address a particular type of dispute.” (Id. at p. 358.) Although Noe‘s arbitration was before the BASF, it was similarly governed by the MFAA so the same analysis applies.
Mallard v. Progressive Choice Ins. Co. (2010) 188 Cal.App.4th 531 also supports this conclusion. That case held that where a statute required two parties to agree to arbitration in their contract, the arbitration was an official proceeding for anti-SLAPP purposes. (Id. at pp. 541–542.) Although the MFAA did not require Noe and Dorit to provide for MFAA arbitration in their fee agreement, it did obligate Dorit to comply with MFAA arbitration even in the absence of that agreement. (
Second, Kibler held that proceedings that were part of a comprehensive licensing scheme can be official proceedings for purposes of the anti-SLAPP statute, and the circumstances here are analogous. Kibler involved a lawsuit based on a hospital peer review proceeding, which is the process by which licensed physicians on staff at a hospital evaluate each other‘s performance and consider outside physicians’ applications for admission to staff privileges. (Kibler, supra, 39 Cal.4th at p. 199.) The Supreme Court held that such proceedings were official proceedings because several statutes required hospitals to offer peer review, report the results of peer review proceedings to the board that licenses physicians, and consult that board‘s records when deciding whether to grant or renew a physician‘s staff privileges. (Id. at pp. 199–200.) The court emphasized that these procedures were designed to help protect the public against incompetent, impaired, or negligent physicians. (Id. at p. 200.) Kibler also noted that peer review proceedings were reviewable via administrative mandate, like the decisions of quasi-judicial administrative agencies. (Ibid.)
Although hospital peer review and MFAA proceedings play different roles in their respective licensure schemes, Kibler‘s reasoning is applicable here. The Legislature charged the State Bar with administering the MFAA system and reviewing local bar associations’ rules for fee arbitrations. (Schatz, supra, 45 Cal.4th at p. 565;
The State Bar‘s involvement in the MFAA program is more than a matter of administrative convenience. The Legislature has instructed the State
Because MFAA arbitration qualifies as an official proceeding under the anti-SLAPP statute under both these lines of authority, we conclude Noe has carried his burden of proving Dorit‘s malicious prosecution cause of action based on Noe‘s MFAA arbitration claim arose from activity protected by the anti-SLAPP statute.
B. Step Two: Probability of prevailing
Once a defendant bringing an anti-SLAPP motion establishes that a claim arises from protected activity, the burden shifts to the plaintiff to demonstrate a probability of prevailing on the claim, meaning the claim has “at least ‘minimal merit.’ ” (Park, supra, 2 Cal.5th at p. 1061.) This second step is “a ‘summary-judgment-like procedure.’ ” (Baral v. Schnitt (2016) 1 Cal.5th 376, 384.) “The court does not weigh evidence or resolve conflicting factual claims. Its inquiry is limited to whether the plaintiff has stated a legally sufficient claim and made a prima facie factual showing sufficient to sustain a favorable judgment. It accepts the plaintiff‘s evidence as true, and evaluates the defendant‘s showing only to determine if it defeats the plaintiff‘s claim as a matter of law.” (Id. at pp. 384–385.)
Noe contends the trial court erred in finding that Dorit established a probability of prevailing because MFAA arbitrations cannot serve as a prior action for a malicious prosecution claim and Dorit failed to submit sufficient evidence to prove Noe lacked probable cause or acted with malice. We agree with Noe that a malicious prosecution claim cannot be based on an MFAA claim, so we need not examine whether Dorit submitted sufficient evidence to support the other elements of the tort.
However, because of the potential for the tort to unduly chill citizens’ willingness to bring disputes to court, malicious prosecution “has traditionally been regarded as a disfavored cause of action” and “the elements of the tort have historically been carefully circumscribed so that litigants with potentially valid claims will not be deterred from bringing their claims to court by the prospect of a subsequent malicious prosecution claim.” (Sheldon Appel Co. v. Albert & Oliker (1989) 47 Cal.3d 863, 872.)
“Courts have decided that various proceedings may or may not give rise to a future malicious prosecution action, largely depending on their nature.” (Brennan v. Tremco Inc. (2001) 25 Cal.4th 310, 313 (Brennan).) As the trial court recognized, no case has addressed whether MFAA arbitration can support a malicious prosecution claim. Courts have held, however, that a malicious prosecution claim cannot be based on private arbitration but can be based on judicial arbitration. (Brennan, supra, at p. 314; Stanley v. Superior Court (1982) 130 Cal.App.3d 460 (Stanley).) As a result, the parties have vigorously disputed whether MFAA arbitration is closer to judicial arbitration or private arbitration.
MFAA arbitration also does not squarely fit the mold of judicial arbitration. In judicial arbitration, relatively small cases filed in court are subject to mandatory diversion for non-binding arbitration before being allowed to proceed to trial. (Mercury Ins. Group v. Superior Court (1998) 19 Cal.4th 332, 343; see also
Fortunately, there is no need to shoehorn MFAA arbitration into either of these two categories. As Brennan recognized, the ultimate questions are whether the nature of MFAA arbitration suits the purpose of the malicious prosecution tort and whether the tort suits the purpose of MFAA arbitration. (See Brennan, supra, 25 Cal.4th at p. 313.) After examining those questions
As noted above, the tort of malicious prosecution serves two purposes: (1) preventing unscrupulous individuals from using the courts for nefarious ends, thereby clogging crowded court dockets; and (2) compensating wronged individuals. (Bertero, supra, 13 Cal.3d at pp. 50–51.) MFAA arbitrations are not court proceedings, so allowing malicious prosecution based on an MFAA arbitration would not serve the first purpose. A client waives the right to MFAA arbitration by filing a suit, and a lawyer must give the client the right to request MFAA arbitration before filing a claim in court. (
Allowing malicious prosecution claims based on MFAA arbitrations would also do little to advance the second purpose of the tort, compensating wronged individuals. While the “right to redress for malicious conduct should not depend upon the form of the proceeding by which the injury is inflicted” (Hardy v. Vial (1957) 48 Cal.2d 577, 581), MFAA arbitrations do not impose the same injury as most types of civil actions or proceedings. A malicious prosecution
The arbitration here seems typical in these respects. MFAA arbitration was created specifically to avoid the need for clients to hire attorneys. (Liska, supra, 117 Cal.App.4th at p. 284.) Because the proceeding is intended to be informal and expeditious (id. at pp. 281, 287), attorneys will likely choose not to hire separate counsel, as Dorit did here. Most bar associations’ MFAA arbitrations are also confidential.4 The State Bar Guidelines for local bar associations’ MFAA programs require the associations to preserve the confidentiality of attorney-client privileged and work-product protected documents disclosed during an arbitration. (Bar Guidelines, ¶6;
Without attorney‘s fees or harm to reputation, the only damage from MFAA arbitration is likely to be the defendant‘s emotional distress. We do not doubt that defending an unjustified demand for MFAA arbitration will often be stressful to the unfortunate defendant of the action. Nonetheless, we expect the limited nature of the claims subject to MFAA arbitration, the limited relief available, and the expeditious nature of the proceedings will mitigate the emotional toll MFAA arbitration imposes on defendants.
Other courts have limited the availability of malicious prosecution after proceedings that would not advance the purposes of the tort. Black v. Hepner (1984) 156 Cal.App.3d 656, 659, held that a small claims action could not support a malicious prosecution claim, in part because “the
By contrast, judicial arbitration can support a malicious prosecution claim precisely because by the time a case is resolved in judicial arbitration, the defendant has already suffered much of the harm that malicious prosecution guards against. As noted by the court in Stanley, supra, 130 Cal.App.3d at p. 468, judicial arbitration follows the filing of a normal civil action with a public complaint, the hiring of attorneys, and potentially extensive discovery. Attorneys also try the judicial arbitration itself, using formal rules of evidence. (Ibid.) When a party has already incurred such costs, it makes sense not to allow the plaintiff to escape liability by accepting an adverse judicial arbitration award to end the action. (Id. at pp. 471–472.) By the same rationale, because parties will not incur such costs in MFAA arbitration, the purposes of malicious prosecution are not advanced by permitting such claims to be based on MFAA proceedings.
In addition to being unnecessary to serve the purposes of the tort, malicious prosecution following MFAA arbitration is undesirable because it would conflict with the central purpose of MFAA arbitration. Pace v. Hillcrest Motor Co. (1980) 101 Cal.App.3d 476 is instructive in this regard. The court there held that a malicious prosecution claim would not lie following a small claims action because it threatened to undermine the purpose of small claims court. (Id. at pp. 478–479.) The court noted that there are no attorneys, pleadings, legal rules of evidence, juries, or formal findings in small claims court because of the theory that “ordinary litigation ‘fails to bring practical justice’ when the disputed claim is small, because the time and expense required by the ordinary litigation process is so disproportionate to
Siam v. Kizilbash, supra, 130 Cal.App.4th at p. 1573, reached the same conclusion in the context of civil harassment protective order hearings under
As Noe points out, this concern applies to MFAA proceedings as well. Like small claims court, the Legislature created MFAA arbitration in response to concerns that the amounts in controversy in fee disputes and the uneven playing field between clients and counsel were not a good fit with the high costs of normal litigation procedures. (Liska, supra, 117 Cal.App.4th at p. 282.) Exposing MFAA arbitration parties to malicious prosecution liability would discourage the use of MFAA arbitration altogether, thereby tilting the playing field back in favor of attorneys. Clients would either refrain from pursuing meritorious fee disputes or return to their former practice of appending malpractice claims to fee disputes in court in order to justify the cost of counsel, thereby driving up attorney‘s malpractice insurance premiums. (See ibid.) Attorneys and clients would both suffer. “In order to maintain the informality and economy of the [MFAA] arbitration proceedings, both the client and the attorney must be assured that the consequences of the arbitration will extend no further.” (Liska, supra, 117 Cal.App.4th at p. 287.)
Dorit cannot satisfy this element because the Legislature has strictly limited the admissibility and effect of MFAA arbitration awards.
Liska held this provision prevented the defendant law firm in an MFAA arbitration from using the arbitration award in its favor for issue preclusion in a subsequent action by the client against the firm and its individual attorneys. (Liska, supra, 117 Cal.App.4th at pp. 287–288.) The court stated that “where the Legislature intended to permit the court to consider the findings of the arbitrators, it said so explicitly, but it otherwise limited the binding effect to which the parties might agree to the award itself—i.e., to the amount of attorney fees (and/or costs) to which the attorney is entitled (or must refund).” (Id. at pp. 285–286.) Thus, while the award prevented the client from challenging the amount of fees to which the attorneys were entitled, it did not prevent the client from requesting other forms of relief or establishing the facts for such relief, even though those facts might overlap with his earlier fee arbitration claim. (Id. at p. 287.)
The same principle prevents Dorit from proving that the arbitration‘s termination in his favor demonstrated his innocence of any wrongdoing. The mere fact that Dorit prevailed and was not required to refund any of his fees to Noe is not sufficient to prove the MFAA arbitration terminated in his favor
Kurz v. Syrus Systems, LLC (2013) 221 Cal.App.4th 748 supports this conclusion. That court held that an employer could not prove a former employee‘s unemployment benefits claim and appeal terminated in the employer‘s favor because
DISPOSITION
The trial court‘s order denying Noe‘s anti-SLAPP motion is reversed. The matter is remanded to the trial court to enter an order granting the motion and to conduct for further proceedings consistent with this opinion.
BROWN, J.
WE CONCUR:
POLLAK, P. J.
TUCHER, J.
Dorit v. Noe A157433
Trial Court: San Francisco City & County Superior Court
Trial Judge: Hon. Ethan P. Schulman
Counsel:
Morris & Stone LLP, Aaron P. Morris, for Defendant and Appellant.
Dorit Law Firm, J. Niley Dorit for Plaintiff and Respondent.