MANN v. QUALITY OLD TIME SERVICE, INC

Filed 5/9/06

CERTIFIED FOR PUBLICATION

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

APPEAL from an order of the Superior Court of San Diego County, Linda B. Quinn, Judge. Affirmed as modified.

Carl M. Hancock for Plaintiffs and Appellants.

Ross, Dixon & Bell, James J. Dalessio and Lindsay J. Reese for Defendants and Respondents.

Water Systems Support, Inc. and its president (collectively WSSI) brought an action against two former independent contractors and their business entity (collectively defendants), alleging defendants violated their confidentiality agreement and made false statements about WSSI to WSSI's customers and governmental agencies. Defendants unsuccessfully moved to strike four of the 13 causes of action under California's anti-SLAPP statute. (Code Civ. Proc.,^[1] § 425.16.) Defendants appealed, and this court held the trial court correctly denied the motion on three of the causes of action, but the court erred in denying the motion as to one cause of action. (Mann v. Quality Old Time Service, Inc. (2004) 120 Cal.App.4th 90 (Mann).)

On remand, defendants sought attorney fees of $64,065 under section 425.16, subdivision (c), which states a defendant prevailing on an anti-SLAPP motion "shall be entitled to recover his or her attorney's fees and costs." WSSI opposed the motion on several grounds, including that defendants were not prevailing parties because they were unsuccessful in striking three of the four challenged causes of action. After a hearing, the court found defendants were prevailing parties within the meaning of section 425.16, subdivision (c) and awarded defendants $57,000 in attorney fees plus $1,906 in costs.

WSSI challenges the attorney fees award on appeal. We conclude the court did not abuse its discretion in determining defendants were prevailing parties on the anti-SLAPP motion. We determine, however, the court erred in failing to reduce the fees to reflect that defendants were only partially successful on the motion. Because of this court's familiarity with this case and the fact the underlying case has settled except for the attorney fees issue, we modify the order rather than remanding the matter to the trial

court. We conclude defendants are entitled to $32,032.50, which is 50 percent of their claimed fees incurred in bringing the anti-SLAPP motion.

FACTUAL AND PROCEDURAL SUMMARY

Background Information

WSSI's complaint alleges the following.^[2] WSSI, a company that maintains industrial water systems, hired Kent Radford and Robert Caslava as independent contractors. Radford and Caslava agreed to keep confidential WSSI's customer information and work guidelines. Several years later, Radford and Caslava formed a competing company, and then solicited WSSI's customers by using the confidential information and making fraudulent and disparaging statements about WSSI, including that it used illegal and carcinogenic chemicals in its cleaning process. Defendants also allegedly engaged in numerous acts of harassment, including reporting WSSI to the National Response Center and the National Terrorist Hotline, falsely claiming that WSSI was "'pouring illegal carcinogenic chemicals into public drainage systems throughout Southern California.'" (Mann, supra, 120 Cal.App.4th at p. 101.)

Based on these and additional facts, WSSI filed a complaint asserting 13 causes of action against Radford and Caslava, and their business entity. Defendants filed an anti-SLAPP motion on four of those claims: interference with contractual relationship, intentional interference with prospective economic advantage, defamation, and trade libel. Defendants argued the claims were subject to the anti-SLAPP statute because (1) defendants' reports to the government agencies were in furtherance of their constitutional right to petition the government; and (2) defendants' statements were made in connection with a "public issue." (§ 425.16, subds. (e)(2), (e)(4).)

In opposition to the motion, WSSI filed its president's declaration, stating that defendants made false reports about WSSI to the National Response Center and the National Terrorist Hotline, and defendants had made false statements to WSSI's customers. WSSI's president denied that WSSI used illegal chemicals or poured them into city or storm drains. WSSI also filed a declaration from a WSSI client, stating that Caslava and Radford informed him that WSSI was using an illegal chemical and illegally dumping the sanitizing solution down storm drains.

The trial court denied the motion to strike, finding the challenged claims did not "'arise from'" an act in furtherance of defendants' right of petition or free speech. On appeal, we affirmed the order denying the motion on all causes of action, except that we reversed on the trade libel cause of action. (Mann, supra, 120 Cal.App.4th at pp. 103-112.) In so doing, we applied well-settled law that requires a party moving to strike under the anti-SLAPP statute to show the challenged cause of action arose from a specified protected activity, and if this burden is met the plaintiff must show a probability of prevailing on the claim. (Id. at p. 102.) We further followed precedent holding that the anti-SLAPP statute applies if a cause of action alleges both protected and unprotected activity unless the protected conduct is merely incidental to the unprotected conduct. (Id. at p. 103.) Rejecting defendants' arguments, we clarified that an anti-SLAPP motion must be denied if the plaintiff shows a probability of prevailing on any theory underlying the "mixed" cause of action. (Id. at pp. 105-106.)

Under these legal principles, we held WSSI's defamation and trade libel claims were mixed causes of action, subject to the anti-SLAPP statute because they were based, in part, on defendants' act of reporting a suspected crime to interested governmental agencies and seeking a governmental investigation. (Mann, supra, 120 Cal.App.4th at p. 104; see § 425.16, subd. (e)(2).) As to the reports to government agencies, we recognized they were absolutely privileged (Civ. Code, § 47, subd. (b)), thus eliminating any actionable theory arising from defendants' alleged false reports to the government. As to the statements to customers, we determined that WSSI met its burden to show a probability of prevailing on its defamation claim, rejecting defendants' evidentiary objections and contentions that their alleged wrongful communications with WSSI's customers were privileged. (Mann, supra, at pp. 106-109.) On the trade libel claim, we held WSSI did not show a probability of prevailing because WSSI did not present any evidence showing it had suffered a specific pecuniary loss as a result of the defendants' communications with WSSI customers. (Id. at p. 109; see Ehrich v. Etner (1964) 224 Cal.App.2d 69, 73 [unlike defamation, trade libel requires evidence of specific pecuniary loss].)

On WSSI's interference claims, we held these claims were not subject to the anti-SLAPP statute because they arose from defendants' communications with WSSI's customers, and not from statements made to governmental agencies. (Mann, supra, 120 Cal.App.4th at p. 110.) We rejected defendants' alternate contention that the interference causes of action were subject to the anti-SLAPP statute because they were based on protected speech in connection with an issue of public interest. (Id. at pp. 110-111.) We reasoned that that "[a]lthough pollution . . . is a matter of general public interest, the focus of the anti-SLAPP statute must be on the specific nature of the speech rather than on generalities that might be abstracted from it. . . . [¶] [D]efendants' alleged statements were not about pollution or potential public health and safety issues in general, but about WSSI's specific business practices." (Id. at p. 111.)

We thus affirmed the court's order to the extent it denied defendants' motion to strike the two interference claims and the defamation claim, and reversed the order to the extent it denied the motion on the trade libel claim. (Mann, supra, 120 Cal.App.4th at p. 112.) We awarded defendants costs on appeal. (Id. at p. 113.)

Attorney Fees Proceedings

Shortly after we remanded the case and before the parties began discovery on the merits of the remaining 12 causes of action against defendants, defendants moved in the superior court for attorney fees pursuant to section 425.16, subdivision (c), which states "a prevailing defendant on a special motion to strike shall be entitled to recover his or her attorney's fees and costs." In support, defendants' counsel submitted a billing summary showing defendants incurred attorney fees of $25,120 for time spent on the anti-SLAPP motion in the trial court, and $33,245 for time spent on the appeal. Defendants also stated they incurred $5,700 in fees for time spent in bringing the attorney fees motion. Thus, defendants sought a total of $64,065 as "prevailing parties" in the proceedings.

In a supporting declaration, defense counsel confirmed the accuracy of the time records, and stated that counsel was required to conduct "extensive research" on the issue of whether a "mixed" cause of action is subject to the anti-SLAPP statute and that each of the challenged causes of action concerned similar legal issues pertaining to the applicability of the anti-SLAPP statute. Counsel asserted that the time spent was reasonable given numerous unsettled issues in SLAPP law at the time the case was brought and considering the "difficulty of the litigation, the skill required, the attention given to the matter, and the success of Defendants' attorneys' efforts." Counsel further stated: "[w]e worked efficiently, but at the same time we took the necessary steps to prepare our briefing and for the oral argument before the reviewing court."

In opposing the attorney fees request, WSSI argued: (1) defendants were not the prevailing parties because the Court of Appeal affirmed the trial court's order refusing to strike three of the four challenged causes of action; and (2) even assuming defendants were "prevailing parties," the attorney fees award should be limited to reflect that defendants prevailed on only one cause of action and that they did not achieve "any level of success relative to the entire litigation."

In reply, defendants argued that the court need not decide the "prevailing party" issue because "the Court of Appeal already has decided it" by awarding defendants their costs on appeal. Defendants thus asserted that "all that remains for this Court to do is to fix the amount of the attorneys' fees and costs to be awarded . . . ."

After oral argument, the court^[3] permitted the parties to file additional briefing on the apportionment issue, i.e., whether the court should award attorney fees only with respect to work performed on the successful portions of the motion. The court thereafter granted defendants' motion, awarding defendants $57,000 in attorney fees and $1,906 in costs. The court explained its ruling as follows: "Defendants ultimately prevailed on [the motion to strike] plaintiffs' trade libel cause of action. Moreover, the Court of Appeal determined that defendants are the prevailing party given the Court of Appeal found that defendants are entitled to costs on appeal. As the prevailing party, defendants are entitled to an award of reasonable attorney fees and costs pursuant to [section] 425.16. . . . [¶] . . . [¶] Apportionment of attorney fees is improper given that the same facts, law, and damages were involved in all causes of action challenged in the [anti-SLAPP motion]. The Court in this ruling, however, awards a lesser sum of attorney fees to defendants. That lesser sum is reasonable and appropriate under the circumstances of this action."

DISCUSSION

WSSI contends the court erred in finding that defendants were prevailing parties on the anti-SLAPP motion, and alternatively, in failing to reduce the attorney fees to reflect defendants' limited success on the motion.

I. Prevailing Party

Section 425.16, subdivision (c) provides that "a prevailing defendant on a special motion to strike shall be entitled to recover his or her attorney's fees and costs."^[4] Under this provision, "any SLAPP defendant who brings a successful motion to strike is entitled to mandatory attorney fees." (Ketchum v. Moses (2001) 24 Cal.4th 1122, 1131 (Ketchum).)

In ComputerXpress, Inc. v. Jackson (2001) 93 Cal.App.4th 993 (ComputerXpress), the court considered the issue of whether a defendant who partially prevails on an anti-SLAPP motion (where the court strikes some but not all of the challenged causes of action) is a "prevailing" defendant under section 425.16, subdivision (c). (ComputerXpress, at pp. 1016-1020.) In examining this question, the court rejected the plaintiffs' reliance on Civil Code section 1717 and instead focused on the statutory distinction between prevailing defendants and prevailing plaintiffs. (ComputerXpress, at pp. 1016-1018.) Unlike a prevailing defendant who is entitled as a matter of right to attorney fees, a prevailing plaintiff is entitled to attorney fees only if the anti-SLAPP motion was "frivolous or is solely intended to cause unnecessary delay." (§ 425.16, subd. (c).) Finding this distinction reflected the Legislature's strong preference for awarding attorney fees to successful defendants, the court stated the phrase "prevailing party" should be interpreted broadly to favor an award of attorney fees to a partially successful defendant. (ComputerXpress, supra, at p. 1018.) The ComputerXpress court additionally relied on similar judicial interpretations of statutory schemes that likewise distinguish between prevailing plaintiffs and defendants in the fee-shifting analysis. (Id. at pp. 1018-1020; see Hensley v. Eckerhart (1983) 461 U.S. 424, 429 (Hensley) [42 U.S.C. § 1988]; Los Angeles Times v. Alameda Corridor Transportation Authority (2001) 88 Cal.App.4th 1381, 1390-1392 [Gov. Code, § 6259, subd. (d)]; see also Wallace v. Consumers Cooperative of Berkeley, Inc. (1985) 170 Cal.App.3d 836, 846 [§ 1021.5].)

Based on these authorities, the ComputerXpress court held the defendants were prevailing parties because they were successful in striking five of the nine challenged causes of action alleged in the complaint. (ComputerXpress, supra, 93 Cal.App.4th at p. 1020.) The court stated the defendants' lack of success on a portion of the motion was relevant to the amount of fees awarded, and not on the issue of whether they were prevailing parties.^[5] (Id. at p. 1019.) The court thus remanded for the trial court to determine the attorney fees incurred for bringing the anti-SLAPP motion challenging the causes of action stricken from the complaint. (Id. at pp. 1020-1021.)

Distinguishing ComputerXpress, a Court of Appeal recently held the defendants who were successful in striking only one cause of action were not "prevailing" parties under the anti-SLAPP statute. (Endres v. Moran (2006) 135 Cal.App.4th 952, 955-956.) In Endres, the plaintiffs alleged the defendants had committed numerous torts and engaged in a conspiracy as a part of a wrongful attempt to control a church. The defendants moved to strike the entire complaint under section 425.16, but were successful only as to the conspiracy cause of action. (Endres, at p. 954.) The trial court declined to award attorney fees to the defendants, finding that the relief granted was minimal compared to the objectives of their motion. (Ibid.) The appellate court affirmed, emphasizing that defendants "accomplished nothing" by bringing the motion: "The possible recovery against defendants did not change. The factual allegations which defendants had to defend did not change. The work involved in trying the case did not change. Defendants' burden concerning their jurisdictional defense did not change. The case was essentially the same after the ruling on the special motion to strike as it was before. The results of the motion were minimal and insignificant, fully justifying the court's finding that defendants should not recover fees." (Id. at p. 955.)

We agree with the legal analysis and results reached by both the ComputerXpress and Endres courts. Given the express legislative preference for awarding fees to successful anti-SLAPP defendants, a party need not succeed in striking every challenged claim to be considered a prevailing party within the meaning of section 425.16. A contrary conclusion would require a partially prevailing defendant to bear the entire cost of the anti-SLAPP litigation at the outset of the case. This would create a strong disincentive for a defendant to bring the motion, undermining the legislative intent to encourage defendants to utilize the anti-SLAPP procedure to eliminate SLAPP claims and to discourage plaintiffs from bringing meritless SLAPP claims. (See Ketchum, supra, 24 Cal.4th at p. 1131.) On the other hand, there is no reason to encourage a defendant to bring an anti-SLAPP motion where the factual and legal grounds for the claims against the defendant remain the same after the resolution of the anti-SLAPP motion. (Endres v. Moran, supra, 135 Cal.App.4th at pp. 955-956.) Where the results of the motion are "'minimal'" or "insignificant" a court does not abuse its discretion in finding the defendant was not a prevailing party. (Id. at p. 556 (conc. opn. of Mosk, J.); see Los Angeles Times v. Alameda Corridor Transportation Authority, supra, 88 Cal.App.4th at pp. 1391-1392.)

We thus hold that a party who partially prevails on an anti-SLAPP motion must generally be considered a prevailing party unless the results of the motion were so insignificant that the party did not achieve any practical benefit from bringing the motion. The determination whether a party prevailed on an anti-SLAPP motion lies within the broad discretion of a trial court. (See Jackson v. Homeowners Assn. Monte Vista Estates-East (2001) 93 Cal.App.4th 773, 789.) We review this determination on an abuse of discretion standard.

Continued in Part II ………..

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^[1] Further statutory references are to the Code of Civil Procedure unless otherwise specified.

^[2] Because the parties have not provided us a complete record of the underlying action, we derive the allegations of the complaint from this court's prior decision. (Mann, supra, 120 Cal.App.4th at pp. 100-102.)

^[3] The superior court judge (Judge Linda Quinn) considering the motion was not the same superior court judge (Judge William Pate) who had ruled on the merits of the anti-SLAPP motion.

^[4] Section 425.16, subdivision (c) states in full: "In any action subject to subdivision (b), a prevailing defendant on a special motion to strike shall be entitled to recover his or her attorney's fees and costs. If 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."

^[5] Unlike here, the court found the attorney work on the successful and unsuccessful claims involved discrete factual and legal theories, and therefore "the problems . . . that may arise when the successful and unsuccessful claims are legally or factually related are not present." (ComputerXpress, supra, 93 Cal.App.4th at p. 1020.)