RUSSELL C. JAY et al., Plaintiffs and Respondents, v. DOUGLAS MAHAFFEY et al., Defendants and Appellants.
No. G047325
Court of Appeal, Fourth District, Division Three, California
July 31, 2013
218 Cal. App. 4th 1522
Sandler, Lasry, Laube, Byer & Valdez, James G. Sandler and Jeffrey M. Byer for Defendants and Appellants Douglas Mahaffey and Susan Ghormley.
Julander, Brown & Bollard and Richard L. Brown for Defendants and Appellants Michael Lawrence and Victoria Lawrence.
Horvitz & Levy, Jeremy B. Rosen, Steven S. Fleischman; McDermott Will & Emery and Chris C. Scheithauer for Plaintiffs and Respondents.
MOORE, J.—This is an appeal from an order denying defense motions pursuant to
I
FACTS
A. Background
At all times relevant, JR was a real estate and development company that owned and leased property in Orange and San Bernardino Counties. JR Capital Group, LLC (JR Capital), was JR‘s sole general partner. JR had many limited partners (more than 50) who were characterized by JR as passive investors. JR, as lessee, was the successor in interest to a long-term ground lease in Anaheim that is not due to expire for another 50 years. The property, since the 1960‘s, has been operated as a mobilehome park.
At some point, the Lawrences became the property‘s owners as successors in interest to the original owner and lessor. Michael5 was apparently unhappy with the lease‘s terms and expressed his desire to sell and redevelop the property, which was impossible because of the long-term lease. In 2007, Michael began to look for ways to end the lease. He offered JR‘s president,
B. First Breach of Lease Action
In August 2008, the Lawrences filed their first breach of lease action against JR, alleging claims for quiet title and declaratory relief and seeking to terminate the lease. They were represented by Mahaffey and Mahaffey & Associates. JR filed a cross-complaint, alleging claims for breach of the lease6 and declaratory relief. During closing argument, Mahaffey stated, with respect to JR, that in a general partnership, “There are no shareholders. There are no directors. The limited partners make no decisions.”
The trial was bifurcated, with the court deciding some issues and the jury others. The Lawrences prevailed on several claims, but JR prevailed on the others. In March 2011, an amended net judgment was entered in JR‘s favor for $129,766.50. The Lawrences appealed, but the trial court‘s decision was subsequently affirmed by this court. (Lawrence v. JR Enterprises, LP (May 15, 2013, G044999) [nonpub. opn.].)
While final judgment in this action was still pending, Mahaffey sent an e-mail to JR‘s counsel on December 8, 2010. Purportedly seeking information regarding the turnover of the one-acre parcel that was the subject of JR‘s cross-complaint, the e-mail pointed to “many other battles ahead between these clients.” Mahaffey stated: “As to the bigger picture, you know of course that final rulings on the issue of lease termination and forfeiture, the final wording on the judgment, who is the prevailing party, attorneys fees . . . new trial motions, and finally an appeal on over 20+ separate issues will be filed.”
He went on to say: “Also, and I am sure this comes as no surprise, a new action for lease termination, raising several breaches and illegal conduct issues will be filed, probably next week.” According to Mahaffey, he learned for the first time during trial that JR was illegally selling mobilehomes on the property, because it lacked the proper licensing. After going on to list other
C. The Interpleader Action and Cross-complaints
On January 17, 2011, the Lawrences sent JR a demand for payment of some $30,000 relating to utilities for one part of the property. The letter requested payment be made to Mahaffey‘s trust account. Shortly thereafter, JR was served with a notice of lien against Mahaffey by Plan 53, LLC. JR‘s counsel sent a response seeking clarification as to whether the amounts claimed in the January 17 letter were subject to the lien, but no response was forthcoming.
On March 2, JR filed a complaint for interpleader, declaratory relief and unjust enrichment regarding payment of money under the lease. On April 26, the Lawrences, represented by Mahaffey, filed the first of two cross-complaints. The first cross-complaint alleged breach of contract for the failure to pay the money demanded in the January 17 letter, breach of contract and request for lease termination/forfeiture based on the allegedly illegal mobilehome sales, and declaratory relief.7 JR filed an anti-SLAPP motion directed
On April 28, Mahaffey sent another e-mail to JR‘s counsel. “As fun as the next five to ten years are going to be between our clients in multiple Courts . . .” he began, before urging JR to settle and purchase the property. He then stated that he would like to depose some of the limited partners, before closing with: “Regards, and wow this next round is going to be a fee generator for a lot of lawyers at your firm . . . (and of course me)!”
On June 20, the Lawrences filed a pleading captioned “Cross-Complaint to Cross-Complaint” in the interpleader action (the second cross-complaint). It alleged essentially the same three causes of action as the first cross-complaint: breach of contract, breach of covenant, and request for lease termination/forfeiture, and declaratory relief. The second cross-complaint, which eventually became the subject of the instant malicious prosecution action, named both JR and Rochelle, one of the limited partners. The Lawrences alleged Rochelle had ratified JR‘s conduct with respect to the mobilehome sales and alleged generally that the limited partners were coventurers who had ratified JR‘s conduct. The Lawrences had not, at that point, taken the deposition of Rochelle or any of the limited partners.
On July 26, the Lawrences dismissed the first cross-complaint with prejudice. On September 12, the Lawrences filed Roe amendments to the second cross-complaint in the interpleader action, thus adding 45 of JR‘s limited partners as cross-defendants. Some of the amendments were signed by Mahaffey and some were signed by Ghormley, his associate.
Prior to filing the amendments, no depositions of limited partners had been taken, although five depositions were noticed subsequently on October 3. Both Mahaffey‘s and Ghormley‘s names appeared in the captions of the deposition notices. According to Mahaffey, he believed, based on his experience, that the limited partners received reports relating to financial performance, “attend meetings and are well-informed about the dealings of their partnership.”8 He therefore believed the limited partners knew, among other things, about the purportedly illegal mobilehome sales.
Leland Jay, one of the limited partners who held a 3 percent interest in JR, had his deposition taken on November 10. According to Mahaffey: “[Jay] testified that as a JR limited partner he was unaware of how much income JR generated from the Property, or what portion of his partnership distributions were attributable to the Property (as opposed to JR‘s other holdings). . . . Mr. Jay further testified he did not know if JR had a license which allowed it to sell mobile homes, did not know whether JR sold mobile homes at the Property, and, if so, did not know if JR generated any income from such sales. . . . He testified that while he annually receives a schedule K-1 and an occasional memo from JR . . . he had never seen JR‘s books or records.” Mahaffey later claimed he decided almost immediately to dismiss the limited partners for a number of business reasons.
On November 15, the limited partners (except Rochelle) filed a demurrer to the third cause of action in the second cross-complaint.9 On the same date, the limited partners filed a challenge under
On November 16, Mahaffey contacted Scheithauer. According to Scheithauer, Mahaffey complained about the 170.6 motion and stated that the Lawrences and the limited partners should be “aligned” against JR and Spiezia. Mahaffey stated that if the limited partners would withdraw their 170.6 motion, the Lawrences would dismiss the limited partners except for Rochelle. He also stated that he would “represent the Limited Partners in a ‘derivative’ action against JR Enterprises and John Spiezia on contingency and would provide a ‘finders fee’ to my law firm.” Mahaffey was not concerned about a conflict of interest because the limited partners “were ‘not really at fault.’ ” The limited partners had been sued ” ‘to get their attention’ and be sure they were aware of how JR Enterprises had ignored the Lawrences’ attempts to settle . . . .”10
On November 17, Scheithauer was contacted by Ghormley. She called to ask whether there would be a stipulation to dismiss the limited partners in exchange for a withdrawal of the 170.6 motion. Scheithauer declined again but did ask about whether Rochelle would be included in such a stipulation. Ghormley said she would need to check with Mahaffey because Rochelle was a “special case.” Nonetheless, on the same day, November 17, the Lawrences proceeded to file dismissals without prejudice as to all the limited partners except Rochelle.
On November 18, Mahaffey wrote Scheithauer a letter expressing his desire to “work with [the limited partners] on a business solution that includes, but is not limited to, a buyout of some or all of their interest” in exchange for financial documents. He also repeated the offer of a derivative action. Among other things, the letter stated: “It is transparent, however, from my deposition of Leland Jay, that the limited partners have absolutely no involvement with the general partner as to decisions regarding the management of the subject lease.”
On November 21, Mahaffey called Scheithauer and told him that if the 170.6 motion was not withdrawn and was granted, the Lawrences would “re-sue” the limited partners they had just dismissed. On November 22, Judge Thomas J. Borris granted the 170.6 motion and transferred the interpleader action to Judge Andrew P. Banks.
On November 23 (the day before Thanksgiving), the Lawrences applied for an ex parte order striking the 170.6 challenge. Scheithauer could not attend as he was travelling for the holiday (a situation about which Mahaffey was aware), and an associate appeared instead.
At the hearing before Judge Gregory H. Lewis, Mahaffey told the court that the Lawrences had taken the deposition of one of the limited partners, “and became convinced that they are so limited in their involvement that those causes of action likely could never be proven.” He argued that significant rulings had taken place before Judge Schumann, the limited partners’ 170.6 motion amounted to “forum shopping,” and they had acted in
At the conclusion of the hearing, Judge Lewis, apparently unaware that Judge Borris had already granted the 170.6 motion, granted the ex parte application to strike the motion.
On November 28, Rochelle, who had not yet appeared, filed a demurrer, cross-complaint and her own 170.6 motion. On November 29, the Lawrences filed a dismissal as to Rochelle, and on November 30, they filed an ex parte application to strike Rochelle‘s 170.6 motion. The Lawrences argued the dismissal rendered the 170.6 motion moot. On November 29, Judge Borris issued an order stating that the court would take no further action as the matter had already been reassigned to Judge Banks. The Lawrences attempted to proceed on their ex parte application anyway, but Judge Schumann ordered the application off calendar due to Judge Borris‘s order confirming that the case had been transferred to Judge Banks.
At the hearing on December 5 before Judge Steven L. Perk, the Lawrences sought relief under
D. The Malicious Prosecution Action
On March 5, 2012, twelve of the limited partners filed the instant malicious prosecution action against the Lawrences, Mahaffey, Mahaffey & Associates, and Ghormley. The complaint pled two causes of action, malicious prosecution for bringing the case and malicious prosecution for continuing it. The Lawrences answered with a general denial. The attorneys filed an answer pleading several affirmative defenses.
In May, defendants filed anti-SLAPP motions. The attorneys’ argument focused on probable cause and malice, arguing that the second cross-complaint did not allege the limited partners were liable for JR‘s contractual
The limited partners’ opposition was accompanied by fairly voluminous evidence, including more than a dozen declarations. The declarations included all 12 of the limited partners, each of whom stated essentially that they were passive investors who had no involvement in JR‘s management or operations. The declarations also included those from other individuals, including attorneys (both the limited partners’ and JR‘s), Spiezia, and others who had had contact with both Michael Lawrence and the attorneys, testifying as to their interactions. The oppositions argued the limited partners had met their burden of demonstrating a prima facie case of malicious prosecution existed, and the motions should therefore be denied.
In their reply briefs, defendants raised the issue of favorable termination for the first time. Mahaffey also submitted a substantive declaration which stated that his reason for dismissing the limited partners was a business decision. Ghormley also filed a declaration, essentially stating she was following Mahaffey‘s directions. The Lawrences filed a declaration from Michael, in which he claimed he was relying on the advice of counsel when he decided to sue the limited partners. Mahaffey filed numerous evidentiary objections and the Lawrences also filed two others.
The limited partners then filed objections to the reply declarations, arguing that defendants could not submit new evidence with their reply. They also filed a declaration from their attorney to address the issues raised by the attorneys for the first time in the reply.
The trial court issued a tentative ruling denying the motions. Among other things, the court stated the evidence showed it was “not at all likely” that defendants “can show any control exercised by limited partners—in fact evidence shows the defendants knew the limited partners were not in control.” Because no tort claims were alleged, the tortious conduct exception in the
II
DISCUSSION
A. Statutory Framework
The anti-SLAPP statute states: “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.” (
Courts engage in a two-step process to resolve anti-SLAPP motions. ” ‘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. (
B. Standard of Review
On appeal, we “review an order granting an anti-SLAPP motion de novo, applying the same two-step procedure as the trial court. [Citation.]” (Cole, supra, 206 Cal.App.4th at p. 1105.) In conducting our review, “[w]e consider ‘the pleadings, and supporting and opposing affidavits . . . upon which the liability or defense is based.’ [Citation.] However, we neither ‘weigh credibility [nor] compare the weight of the evidence. Rather, [we] accept as true the evidence favorable to the plaintiff [citation] and evaluate the defendant‘s evidence only to determine if it has defeated that submitted by the plaintiff as a matter of law.’ [Citation.]” (Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 269, fn. 3 [46 Cal.Rptr.3d 638, 139 P.3d 30] (Soukup).)
With respect to evidentiary challenges submitted in connection with an anti-SLAPP motion, we review the trial court‘s rulings for abuse of discretion. (Morrow v. Los Angeles Unified School Dist. (2007) 149 Cal.App.4th 1424, 1444 [57 Cal.Rptr.3d 885].) “A trial court‘s exercise of discretion will be disturbed only for clear abuse. [Citation.]” (Batarse v. Service Employees Internat. Union, Local 1000 (2012) 209 Cal.App.4th 820, 827 [147 Cal.Rptr.3d 340].)
C. Evidentiary Objections to the Reply Declarations
Before we address the substance of the anti-SLAPP motions, we address defendants’ evidentiary argument. Defendants contend the trial court abused its discretion by excluding the declarations of Michael, Mahaffey and Ghormley that were filed with their reply briefs in the trial court. As noted above,
This argument is misplaced. Neither the Lawrences nor the attorneys cite any anti-SLAPP cases in which, for the first time in reply, the moving parties introduced entirely new evidence. They cite cases in which courts have considered evidence in reply, but such evidence was supplemental to evidence submitted in the moving papers, not brand new. In Wong v. Jing (2010) 189 Cal.App.4th 1354 [117 Cal.Rptr.3d 747] (cited by defendants for the first time in their reply briefs), the court, in dicta, suggested that a reply declaration was sufficient to establish a defendant‘s lack of liability. There was, however, no explicit evidentiary ruling in that case.
Defendants also argue the statutory language of
The general rule of motion practice, which applies here, is that new evidence is not permitted with reply papers. This principle is most prominent in the context of summary judgment motions, which is not surprising, given that it is a common evidentiary motion. “[T]he inclusion of additional evidentiary matter with the reply should only be allowed in the exceptional
This rule is based on the same solid logic applied in the appellate courts, specifically, that “[p]oints raised for the first time in a reply brief will ordinarily not be considered, because such consideration would deprive the respondent of an opportunity to counter the argument.” (American Drug Stores, Inc. v. Stroh (1992) 10 Cal.App.4th 1446, 1453 [13 Cal.Rptr.2d 432]; see Browne v. County of Tehama (2013) 213 Cal.App.4th 704, 720, fn. 10 [153 Cal.Rptr.3d 62].)
To the extent defendants argue they had the right to file any reply declarations at all, they are not wrong. Such declarations, however, should not have addressed the substantive issues in the first instance but only filled gaps in the evidence created by the limited partners’ opposition. Defendants’ decision to wait until the reply briefs to bring forth any evidence at all, when the limited partners would have no opportunity to respond, was simply unfair. Thus, while the trial court had discretion to admit the reply declarations, it was not an abuse of discretion to decline to do so.
In any event, even if we were to consider this evidence, it is ultimately of little import, due to the manner in which anti-SLAPP motions are reviewed. As we discussed above, “we neither ‘weigh credibility [nor] compare the weight of the evidence. Rather, [we] accept as true the evidence favorable to the plaintiff [citation] and evaluate the defendant‘s evidence only to determine if it has defeated that submitted by the plaintiff as a matter of law.’ [Citation.]” (Soukup, supra, 39 Cal.4th at p. 269, fn. 3.)
D. Protected Activity
As noted ante in part IIA., the first step in the anti-SLAPP analysis is to determine whether the challenged cause of action arises from protected activity. (Jarrow Formulas, Inc. v. LaMarche, supra, 31 Cal.4th at p. 733.) This first step is readily satisfied here, as it is in nearly all claims for malicious prosecution. (See id. at pp. 734–735.) “It is well established that filing a lawsuit is an exercise of a party‘s constitutional right of petition. [Citations.] ’ “[T]he constitutional right to petition . . . includes the basic act
E. Malicious Prosecution—Prima Facie Requirements
“To prevail on a malicious prosecution claim, the plaintiff must show that the prior action (1) was commenced by or at the direction of the defendant and was pursued to a legal termination favorable to the plaintiff; (2) was brought without probable cause; and (3) was initiated with malice. [Citation.]” (Soukup, supra, 39 Cal.4th at p. 292.) Continuing an already filed lawsuit without probable cause may also be the basis for a malicious prosecution claim. (Zamos v. Stroud (2004) 32 Cal.4th 958, 969 [12 Cal.Rptr.3d 54, 87 P.3d 802] (Zamos); see Daniels v. Robbins (2010) 182 Cal.App.4th 204, 226 [105 Cal.Rptr.3d 683].)
We keep in mind that malicious prosecution is a “disfavored action.” (Leonardini v. Shell Oil Co. (1989) 216 Cal.App.3d 547, 566 [264 Cal.Rptr. 883].) “[T]he elements of [malicious prosecution] 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 [254 Cal.Rptr. 336, 765 P.2d 498] (Sheldon Appel).)
F. Favorable Termination
” ‘To determine whether a party has received a favorable termination, we consider “the judgment as a whole in the prior action. . . .” [Citation.]’ [Citation.] Victory following a trial on the merits is not required. Rather, ’ “the termination must reflect the merits of the action and the plaintiff‘s innocence of the misconduct alleged in the lawsuit.” [Citation.]’ [Citation.]” (Siebel v. Mittlesteadt (2007) 41 Cal.4th 735, 741 [62 Cal.Rptr.3d 155, 161 P.3d 527].) Defendants argue that the dismissal of the limited
“A voluntary dismissal is presumed to be a favorable termination on the merits . . . .” (Sycamore Ridge Apartments LLC v. Naumann (2007) 157 Cal.App.4th 1385, 1400 [69 Cal.Rptr.3d 561].) Here, defendants offer no evidence to rebut this presumption other than Mahaffey‘s excluded declaration, which is, of course, not evidence at all.
Even if we were to consider Mahaffey‘s declaration on this point, his self-serving testimony is belied by other statements, such as his telling the court that “the limited partners have absolutely no involvement with the general partner as to decisions regarding the management of the subject lease.” Such a contemporaneous statement strongly suggests the limited partners were dismissed because they had no liability. At best, the evidence is conflicting and therefore cannot defeat the limited partners’ prima facie case. (Soukup, supra, 39 Cal.4th at p. 269, fn. 3.) From either angle, the court properly found the limited partners had set forth a prima facie case of favorable termination.
G. Probable Cause
“Probable cause exists when a lawsuit is based on facts reasonably believed to be true, and all asserted theories are legally tenable under the known facts.” (Cole, supra, 206 Cal.App.4th at p. 1106Sheldon Appel, supra, 47 Cal.3d at p. 878.) We evaluate this question of law under an objective standard, asking whether any reasonable attorney would have thought the claim tenable. (Zamos, supra, 32 Cal.4th at p. 971.)
More specifically, ” ’ “probable cause to bring an action does not depend on it being meritorious, as such, but upon it being arguably tenable, i.e., not so completely lacking in apparent merit that no reasonable attorney would have thought the claim tenable. [Citation.]” ’ [Citation.] Probable cause exists if the claim is legally sufficient and can be substantiated by competent evidence. [Citation.]” (Antounian v. Louis Vuitton Malletier (2010) 189 Cal.App.4th 438, 448–449 [117 Cal.Rptr.3d 3].) “In analyzing the issue of probable cause in a malicious prosecution context, the trial court must consider both the factual circumstances established by the evidence and the legal theory upon which relief is sought. A litigant will lack probable cause for his action either if he relies upon facts which he has no reasonable cause to believe to be true, or if he seeks recovery upon a legal theory which is
The limited partners argue that they are absolutely immune from any lawsuit seeking to impose liability on JR under the lease. Under the
They therefore argue that given these facts, no reasonable attorney could ever have thought it was reasonable to bring the claims in the second cross-complaint for breach of contract, breach of covenant, and declaratory relief. The breach of contract cause of action specifically alleged a breach of the lease. The second cause of action for breach of covenant alleged JR had breached a covenant in the lease by conducting illegal mobilehome sales, and the limited partners “ratified this illegal conduct.” The basis for the second cause of action was that such alleged illegal activity violated a specific provision in the lease. The declaratory relief claim merely alleged there was a controversy and sought a declaration interpreting the responsibilities of the parties. Based on the narrowly circumscribed liability of limited partners under law and the nature of the claims alleged in the second cross-complaint, we agree with the limited partners that they have stated a prima facie case demonstrating a lack of probable cause. We therefore examine defendants’ evidence to see if they can defeat the claim as a matter of law. (Soukup, supra, 39 Cal.4th at p. 269, fn. 3.)
Defendants contend that the limited partners were not exempt from tort liability, relying on an exemption in
The limited partners also cite Kreeger v. Wanland (2006) 141 Cal.App.4th 826 [46 Cal.Rptr.3d 790] (Kreeger), arguing that even if the Lawrences had valid unpled tort claims, they were required to demonstrate probable cause for each and every cause of action in the underlying case. “Where a prior action asserted several grounds for liability, an action for malicious prosecution will lie if any one of those grounds was asserted with malice and without probable cause. [Citation.]” (Id. at p. 832.) The limited partners argue it is indisputable that the Lawrences sued them for breach of lease, a cause of action that no reasonable attorney would bring given the state of the law regarding the liability of limited partners for contractual obligations. They are correct.
The Lawrences, for the first time in their reply brief, argue they relied on Mahaffey‘s advice. This is often a valid defense. “Reliance upon the advice of counsel, in good faith and after full disclosure of the facts, customarily establishes probable cause. [Citations.]” (Sosinsky v. Grant (1992) 6 Cal.App.4th 1548, 1556 [8 Cal.Rptr.2d 552].) As discussed above, however, we do not entertain new points raised for the first time in a reply brief absent good cause. (Reichardt v. Hoffman (1997) 52 Cal.App.4th 754, 764 [60 Cal.Rptr.2d 770].) There is absolutely no sound reason this issue could not have been raised in the Lawrences’ opening brief. We therefore grant the limited partners’ motion to strike pages 13 to 17 of the Lawrences’ reply brief.
Further, even if we were to consider this argument, it is premised on statements made by Mahaffey and Michael in their excluded reply declarations and therefore unsupported by admissible evidence. In sum, we conclude the limited partners successfully set forth a prima facie showing of the lack of
H. Malice
“The ‘malice’ element . . . relates to the subjective intent or purpose with which the defendant acted in initiating the prior action. [Citation.] The motive of the defendant must have been something other than that of bringing a perceived guilty person to justice or the satisfaction in a civil action of some personal or financial purpose. [Citation.] The plaintiff must plead and prove actual ill will or some improper ulterior motive. [Citation.]” (Downey Venture v. LMI Ins. Co. (1998) 66 Cal.App.4th 478, 494 [78 Cal.Rptr.2d 142] (Downey Venture).)
The lack of probable cause is one factor in determining the presence of malice, but alone it is insufficient. (HMS Capital, supra, 118 Cal.App.4th at p. 218.) “Merely because the prior action lacked legal tenability, as measured objectively (i.e., by the standard of whether any reasonable attorney would have thought the claim tenable [citation]), without more, would not logically or reasonably permit the inference that such lack of probable cause was accompanied by the actor‘s subjective malicious state of mind. In other words, the presence of malice must be established by other, additional evidence.” (Downey Venture, supra, 66 Cal.App.4th at p. 498, fn. omitted.)
Such other evidence “is not limited to actual hostility or ill will toward the plaintiff. Rather, malice is present when proceedings are instituted primarily for an improper purpose.” (Sierra Club Foundation v. Graham (1999) 72 Cal.App.4th 1135, 1157 [85 Cal.Rptr.2d 726].) “Suits with the hallmark of an improper purpose” include “those in which: ‘. . . (1) the person initiating them does not believe that his claim may be held valid; (2) the proceedings are begun primarily because of hostility or ill will; (3) the proceedings are initiated solely for the purpose of depriving the person against whom they are initiated of a beneficial use of his property; (4) the proceedings are initiated for the purpose of forcing a settlement which has no relation to the merits of the claim.’ [Citation.]” (Ibid.)
Because direct evidence of malice is rarely available, “malice is usually proven by circumstantial evidence and inferences drawn from the evidence.” (HMS Capital, supra, 118 Cal.App.4th at p. 218.)
The trial court found there was “ample” evidence of malice, and much of that evidence relates directly to Mahaffey. Mahaffey‘s statement during the first breach of lease case that “[t]he limited partners make no decisions” strongly suggests that Mahaffey was well aware that as a general rule, limited partners did not actively participate in the management of a limited partnership.
After that case was over, Mahaffey sent an e-mail to JR‘s counsel that included a number of thinly veiled threats of ongoing litigation, pointing to “many other battles ahead between these clients.” He warned of a new action and stated that if JR did not wish to discuss settlement seriously, “[t]here will be many opportunities in the next five years of Superior Court and Court of Appeal litigation to further develop the clients view points. . . . At this point I assume they understand that 500K a year of an attorneys fees budget on this lease will become the norm for many years to come . . . .” Several months later, after the interpleader action was filed, Mahaffey again stated that if JR did not settle, they could look forward to “the next five to ten years are going to be between our clients in multiple Courts” which would be a “fee generator” for the lawyers in the case. Taken together, all of these statements raise a strong inference that Mahaffey‘s (and the Lawrences‘) goal in the ongoing litigation was not to resolve genuine legal disputes, but to push JR into a settlement.
Rochelle was brought into the interpleader action when the Lawrences filed the second cross-complaint, and the other limited partners were added by Roe amendment shortly thereafter. A number of things happened thereafter that suggest the limited partners were sued for an improper purpose. When Scheithauer asked Ghormley why the limited partners had been sued for breach of a lease to which they were not parties, she responded that “Doug Mahaffey has plans for the Limited Partners.”
After the limited partners (except Rochelle) filed a demurrer and 170.6 motion, Mahaffey contacted Scheithauer and claimed that the Lawrences and the limited partners should be “aligned” against JR and Spiezia. He offered to dismiss the limited partners (except Rochelle) if they would withdraw the 170.6 motion and then offered to “represent the Limited Partners in a ‘derivative’ action against JR Enterprises and John Spiezia on contingency and provide a ‘finders fee’ ” to Scheithauer‘s firm. He was unconcerned about a conflict of interest because the limited partners “were ‘not really at fault’ ” and had been sued ” ‘to get their attention’ and be sure they were aware of how JR Enterprises had ignored the Lawrences’ attempts to settle . . . .” After the limited partners were dismissed, Mahaffey called Scheithauer and told him that if the 170.6 motion was not withdrawn and was
All of these acts raise a very strong inference that the limited partners had not been sued to vindicate a legal right but to act as pawns in the Lawrences’ ongoing chess game against JR. Indeed, a reasonable trier of fact could conclude that this case appears to be a poster child for cases instituted primarily for an improper purpose, which is one of the hallmarks of malice. (Sierra Club Foundation v. Graham, supra, 72 Cal.App.4th at p. 1157.)
The only evidence to contradict the facts the limited partners established was Mahaffey‘s reply declaration, which, as we have noted several times, was properly deemed inadmissible. But even if we did consider Mahaffey‘s self-serving declaration, at best it would serve to create factual disputes that are not sufficient grounds upon which to grant the anti-SLAPP motion. (Soukup, supra, 39 Cal.4th at p. 269, fn. 3.) Was the evidence sufficient? “Overwhelming” would be a better word. The limited partners more than met their burden to establish a prima facie case of malice as to Mahaffey.
2. Ghormley
Ghormley‘s argument, supported by evidence raised for the first time below in her stricken reply declaration, essentially argued that she was an associate who was following Mahaffey‘s instructions and nothing more. Even if we considered the stricken reply, there is sufficient evidence of malice to overcome an anti-SLAPP motion.
The limited partners presented evidence that Ghormley signed 25 of the Roe amendments, and her name appeared in the captions of the five deposition notices served on the limited partners. She also communicated with Scheithauer, telling him, when asked why the limited partners were being sued for breach of a lease to which they were not parties, that “Doug Mahaffey has plans for the Limited Partners.” In another call, in which she offered to dismiss the limited partners if the first 170.6 motion was withdrawn, she referred to Rochelle as a “special case.” When Rochelle was finally dismissed, Ghormley “personally processed” the paperwork.
Attorneys have been held liable for associating into cases containing frivolous claims. (Cole, supra, 206 Cal.App.4th at p. 1119.) The attorneys in Cole claimed “they did no actual work” (id. at p. 1115) on the case underlying the malicious prosecution action and had merely associated in on the matter. The court rejected their argument that they could avoid liability for malicious prosecution “merely by showing that they took a passive role in that case as standby counsel.” (Id. at p. 1100.)
We agree with the trial court that the case against Ghormley was not overwhelming, but her actions were sufficient to raise an inference of malice. She did not merely sign documents but knew enough about the case to speak to opposing counsel and to propose dismissal in exchange for withdrawing a 170.6 motion—an action that strongly gives rise to an inference that she knew the case had no merit and was being prosecuted for an improper purpose. Thus, the evidence of malice is sufficient to overcome an anti-SLAPP motion.
3. The Lawrences
Michael‘s prelitigation conduct, when taken together with the lack of probable cause, is sufficient to give rise to an inference of malice due to improper purpose. The evidence demonstrated that Michael wanted to sell and redevelop the property, which was impossible due to the long-term lease, and was actively looking for ways to end the lease. Among other things, he tried to reach a side deal with Spiezia, tried to organize the limited partners against JR, and tried to persuade the City of Anaheim to “threaten condemnation” to achieve his goal of terminating the lease. Taken together, these facts raise an inference that Michael did not bring the limited partners into the case because he truly believed they were liable but as another tactic to create enough misery for JR that they would settle the case. Because of the close relationship between the Lawrences, it is reasonable to infer that Victoria was aware of Michael‘s actions and shared his intent. We would find the same to be true, incidentally, if Victoria had been the more active spouse in this matter.
The Lawrences offer no evidence sufficient to overcome these facts as a matter of law. Michael‘s reply declaration, as we have noted, was properly excluded, and at best it would create factual disputes insufficient to overcome the limited partners’ prima facie case. (Soukup, supra, 39 Cal.4th at p. 269, fn. 3.) Victoria offered no evidence at all. We therefore conclude the court did not err in finding the limited partners had established a prima facie case of malice as to the Lawrences.
DISPOSITION
The trial court‘s order is affirmed. The limited partners are entitled to their costs on appeal.
Rylaarsdam, Acting P. J., and Bedsworth, J., concurred.
Appellants’ petition for review by the Supreme Court was denied October 30, 2013, S213296.