Pearl v. Deitch

Filed 3/16/07 Pearl v. Deitch CA2/2

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION TWO

APPEALS from orders of the Superior Court of Los Angeles County.

Paul G. Flynn, Judge. Affirmed.

Feldman & Associates, Mark A. Feldman, Craig C. Lang for Plaintiff and Appellant.

Law Offices of Rosario Perry, Rosario Perry, Robert J. Franklin for Defendant and Appellant Donna Deitch and for Defendants and Respondents Law Offices of Rosario Perry, Rosario Perry and Lisa Howard.

___________________________________________________

This appeal and cross-appeal are from a partially successful special motion to strike pursuant to the anti-SLAPP statute,^[1]Code of Civil Procedure section 425.16.^[2] Plaintiff Gary Pearl appeals from the trial courts order granting a special motion to strike his cause of action alleging malicious prosecution by defendants Donna Deitch and Deitchs attorneys (Law Offices of Rosario Perry, and attorneys Rosario Perry and Lisa Howard). Pearl also challenges the orders awarding attorney fees and costs. Deitch and her attorneys cross-appeal and challenge that aspect of the courts order which denied their special motion to strike Pearls causes of action for breach of contract and restitution after rescission.

We affirm the orders under review.

FACTUAL AND PROCEDURAL SUMMARY

In 1993, Pearl rented a condominium unit in Santa Monica from Deitch and also separately bought from her an option agreement setting forth terms for his possible future purchase of the unit. After several years, Pearl sued Deitch to enforce the option contract, which resulted in a settlement agreement entailing Pearls receipt of $62,000, the dismissal of his action, and the stipulation to an entry of judgment. Pearl also agreed to vacate the premises and [u]pon vacating the premises . . . to be responsible for any damage he causes, reasonable wear and tear excluded. The parties also specified that, The releases within this agreement do not apply to any acts, claims or damages which occur after July 31, 2002, and that the then existing condition of the premises was acceptable. Additionally, the agreement contained a broad provision permitting the recovery of attorney fees to the prevailing party if any litigation ensued under the settlement agreement.

Thereafter, Deitch sued Pearl, alleging causes of action for Pearls breach of the covenant to keep and surrender the premises in good condition, and for waste in that Pearls actions injuriously affected the market value of the property. The lawsuit was based on alleged water and other physical damage to the premises. Specifically, Deitch alleged, in pertinent part, damage from exposure to the elements by leaving doors and windows open at all times causing stains and erosion, damage from holes in the walls allowing water, rain and other debris to enter the condominium, and damage from Pearls large salt water fish tank spilling water.

Three weeks before the scheduled trial date of November 2, 2004, Deitch asked Pearl to stipulate to a continuance. Deitch, a television and film producer, had committed to attend a film-themed cruise, on which she was an advertised and featured speaker and workshop leader for approximately 700 aspiring directors and producers on a cruise ship from October 31 through November 6, 2004. Deitch explained that such prestigious speaking engagements were important to her career, as they provided valuable networking opportunities that often lead to employment. Deitch also asserted that she could not in good conscience cancel the speaking engagement because it would have disappointed and disrupted the many paying attendees.

However, Pearl refused to stipulate to a continuance. Deitch then moved for a continuance, which the trial court denied for lack of good cause. Several days later, Deitch orally requested the court to reconsider the continuance. Pearl remained opposed, and the trial court again denied her request for a continuance. Since Deitch deemed her speaking engagement and associated meetings and workshops so valuable to her career and viewed defaulting on her contractual obligations not a professional option, especially because her name was used to advertise the event, she voluntarily dismissed her action against Pearl without prejudice.

Pearl then filed the present lawsuit against Deitch and Deitchs attorneys. Pearl alleged causes of action for malicious prosecution and fraud against all four defendants. He also alleged causes of action against Deitch only for breach of contract and restitution after rescission. The cause of action for breach of contract (i.e., the settlement agreement) was based on Deitchs having filed a lawsuit against Pearl for damages to the condominium from which Deitch had agreed to release Pearl, causing her to expend money on attorney fees and costs. The cause of action for restitution after rescission (i.e., to obtain title to the premises) was based on the ground that the settlement agreement was rescinded by Deitch when she filed her lawsuit against Pearl. Pearl thus sought a ruling permitting him to purchase the condominium at the 1993 option agreement price (approximately $294,000).

Deitch and Deitchs attorneys then both filed anti-SLAPP motions, pursuant to section 425.16. In support of their anti-SLAPP motions, they argued that Pearl could not show a probability of prevailing on his claims and that the claims should be stricken. Since all of Pearls claims in his lawsuit arose from Deitch and her attorneys exercise of First Amendment rights related to the filing of their lawsuit, Pearl had to show a probability of prevailing on his claims to survive the anti-SLAPP motions.

Deitch and Deitchs attorneys argued that they had probable cause to sue Pearl and did not breach the settlement agreement because each of Deitchs claims sought recovery for damages purportedly occurring after the date of the settlement agreement. They also challenged Pearls legal theory that the parties mutual release was a covenant not to sue because a release provides a defense, not a duty. Deitch and her attorneys further argued that Pearl failed to establish a probability of prevailing since he failed to submit proof of his claim that he actually spent money defending himself, and thus he could not substantiate his damages.

At the hearing on the anti-SLAPP motions, Pearl argued that the damages that are being sought in the complaint all were prior to the settlement agreement. The trial court agreed, concluded That is why I think you still have a breach of contract claim against Deitch, and denied the motion to strike the breach of contract and rescission claims. Deitch also argued that Pearl brought forth no evidence that he suffered any damages because of our alleged breach of contract, and he failed to document the allegation that he spent over $30,000 in legal fees. The court indicated that Deitchs damages argument was premature and should be addressed in a motion for summary adjudication. It thus denied the anti-SLAPP motion to strike as to the contract claim, as well as the rescission cause of action.

However, the trial court struck the malicious prosecution claims because Deitchs voluntary dismissal of her lawsuit against Pearl did not constitute a favorable termination. Pearl disagreed and argued that as a matter of law a voluntary dismissal was a favorable termination and that, in any event, the reason for the dismissal (based on comments made during settlement negotiations) was that Deitch knew her lawsuit had no merit. The trial court, however, found that Deitch had economic reasons for dismissing her lawsuit, and it was thus not a voluntary dismissal on the merits for the purposes of a subsequent malicious prosecution action. The court thus struck the malicious prosecution claims as to both Deitch and Deitchs attorneys.

The trial court also dismissed the fraud cause of action on the grounds that there was no evidence that at the time of the settlement agreement that Deitch or her attorneys had any intent to defraud.^[3] Additionally, pursuant to section 425.16, subdivision (c), the court awarded attorney fees and costs to Deitch ($4,165) and Deitchs attorneys ($9,270).

Pearl appeals from the orders granting the anti-SLAPP motions as to the malicious prosecution causes of action and from the subsequent orders awarding attorney fees and costs. Deitch cross-appeals, alleging that Pearls remaining causes of action for breach of contract and rescission also should have been dismissed because (1) they are covered under the anti-SLAPP statute, (2) they are compulsory counterclaims that are waived because Pearl failed to raise them in Deitchs lawsuit, (3) the requisite elements of those causes of action cannot be satisfied, (4) the contract claim is an invalid collateral attack on a stipulated judgment, and (5) the rescission claim is barred by laches.

We affirm the orders under review, as to both the appeal and the cross-appeal.

DISCUSSION

I. Appeal and Review

An order granting or denying a special motion to strike is appealable. ( 425.16, subd. (i).) The courts ruling on a motion under section 425.16 is subject to our independent, de novo review. (Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 269, fn. 3; Huntingdon Life Sciences, Inc. v. Stop Huntingdon Animal Cruelty USA, Inc. (2005) 129 Cal.App.4th 1228, 1245.)

II. Overview of the Anti-SLAPP Statute

The anti-SLAPP statute is aimed at curbing lawsuits brought primarily to chill the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances. ( 425.16, subd. (a).) Protection is extended to any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law, and to any conduct in furtherance of the exercise of the constitutional right of petition . . . . ( 425.16, subd. (e)(2), (4). The Legislature commands that the provisions of the anti- SLAPP statute be construed broadly. ( 425.16, subd. (a); Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 735.)

There are two components to a special motion to strike brought under section 425.16. First, the defendant must make a threshold showing that the lawsuit arises from an act in furtherance of the defendants constitutional right of petition or free speech. ( 425.16, subd. (b)(1); see Equilon Enterprises v. Consumer Cause, Inc., supra, 29 Cal.4th at p. 67.) Second, if the lawsuit arises from an act in furtherance of such a constitutional right, it is subject to a special motion to strike unless the court determines there is a reasonable probability that the plaintiff will prevail on the claim. ( 425.16, subd. (b)(1); see Zamos v. Stroud (2004) 32 Cal.4th 958, 965; City of Cotati v. Cashman (2002) 29 Cal.4th 69, 76.)

III. Application of the Anti-SLAPP Statute

(A.)Threshold Showing that the Lawsuit Arises from Protected Activity

The threshold showing required by the statute is readily satisfied in this case as to all three causes of action.

Malicious prosecution cause of action

Malicious prosecution actions are subject to scrutiny under the anti-SLAPP statute: such suits may chill the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances. (Jarrow Formulas, Inc. v. LaMarche, supra, 31 Cal.4th at pp. 739.) By definition, a malicious prosecution suit alleges that the defendant committed a tort by filing a lawsuit. (Id. at p. 735.) Here, Pearls malicious prosecution cause of action arises from defendants exercise of their First Amendment rights in filing the underlying lawsuit.

Contract and rescission causes of action

Similarly, Pearls causes of action for breach of contract and rescission arose out of Deitchs exercise of a constitutionally protected activity. In Navellier v. Sletten (2002) 29 Cal.4th 82, 90, the Supreme Court held that section 425.16 applied to a breach of contract claim alleging that the filing of a cross-complaint breached a settlement agreement, a situation similar to that here where Pearl sued Deitch alleging breach of contract and seeking rescission to enforce the option contract. Since the constitutional right of petition encompasses the basic act of filing litigation (id. at p. 90), an action seeking recovery for filing a lawsuit in breach of contract falls within the ambit of the anti-SLAPP statute. (Id. at p. 92.)

Here, Pearl alleged causes of action for breach of contract in that Deitch breached the settlement agreement by filing a lawsuit against Pearl for damages to the condominium after Deitch had released Pearl, and for rescission alleging that the settlement agreement was rescinded and terminated by Deitch when she filed her lawsuit against Pearl. Since both claims arise from Deitchs protected act of filing litigation (Navellier v. Sletten, supra, 29 Cal.4th at p. 90), Deitch has satisfied her threshold burden of showing Pearls claims arose from a protected activity within the ambit of the anti-SLAPP statute.

(B.) Probability of Prevailing

Once the first component of an anti-SLAPP motion is satisfied, the burden shifts to the plaintiff to establish a probability of prevailing. (HMS Capital, Inc. v. Lawyers Title Co. (2004) 118 Cal.App.4th at 204, 213.) The court must examine the pleadings, and the plaintiff must demonstrate that the complaint is both legally sufficient and supported by prima facie evidence. (Jarrow Formulas, Inc. v. LaMarche, supra, 31 Cal.4th at p. 741; Major v. Silna (2005) 134 Cal.App.4th 1485, 1498.)

The malicious prosecution cause of action

To establish a claim for malicious prosecution, the plaintiff must show a favorable termination of the underlying lawsuit. (Lackner v. LaCroix (1979) 25 Cal.3d 747, 749.) It is not essential to maintenance of an action for malicious prosecution that the prior proceeding was favorably terminated following trial on the merits. However, termination must reflect on the merits of the underlying action. (Id. at p. 750.) [ A] voluntary dismissal, even one without prejudice, may be a favorable termination which will support an action for malicious prosecution. (Fuentes v. Berry (1995) 38 Cal.App.4th 1800, 1808.) In such a case, the reasons underlying the termination must be examined to see if it reflects the opinion of the court or of the prosecuting party that the action would not succeed. (Ibid.)

The evidence in this case does not show a termination in favor of Pearl in the underlying lawsuit relating to the merits of the case. Rather, for practical business and financial reasons, prompted by Deitchs inability to obtain a continuance of the trial to avoid a critical business conflict, Deitch voluntarily dismissed the underlying lawsuit without prejudice. There is no viable evidence that Deitch or her attorneys doubted the legitimacy of her case.

Pearls argument to the contrary is based, in pertinent part, on the characterization by Pearls attorney of certain statements made during settlement discussions. Pearls attorney indicated that during the final status conference Deitchs attorney stated that although Deitch was not going to be available for trial, she was not going to testify and wanted to proceed to trial anyway. Also, according to Pearls attorney, although Deitchs attorney admitted the case lacked any merit, Deitch insisted on prosecuting it to cause Pearl to incur attorney fees and court costs, and the settlement conference judge at one point told the parties that Deitchs explanation about water damage at the condominium lacked credibility. Pearl thus argues that such acknowledgements by Deitchs attorney and comments by the judge undermine Deitchs later assertions that she dismissed her case against Pearl because she could not appear for trial because of a professional commitment.

Apart from the inadmissibility of any comments by a judge or counsel made in the context of settlement discussions (Evid. Code  1119, 1120), looking behind the dismissal to see if Deitch and her attorneys sought to terminate the litigation because they did not think it could be won . . . [] . . . wrongly confuses the [two malicious prosecution] elements of [lack of] probable cause and favorable termination. (Villa v. Cole (1992) 4 Cal.App.4th 1327, 1337-1338.) The test is whether or not the termination tends to indicate the innocence of the defendant or simply involves technical, procedural or other reasons that are not inconsistent with the defendants guilt. (Eells v. Rosenblum (1995) 36 Cal.App.4th 1848, 1855.) Thus, Deitchs dismissal must establish Pearls innocence for him to maintain a malicious prosecution action. (Jaffe v. Stone (1941) 18 Cal.2d 146, 150; see Crowley v. Katleman (1994) 8 Cal.4th 666, 686.)

If the dismissal was on technical grounds, for procedural reasons, or for any other reason not inconsistent with . . . guilt, it does not constitute a favorable termination. (Jaffe v. Stone, supra, 18 Cal.2d at p. 150.) As in the present case, Deitchs voluntary dismissal for economic considerations is considered technical and does not establish the malicious prosecution plaintiffs lack of liability. (See, e.g., Haight v. Handweiler (1988) 199 Cal.App.3d 85, 89 [voluntary dismissal after settlement with other defendants who provided adequate compensation for injuries].) Deitchs voluntary dismissal was related to pragmatic financial and business considerations triggered by the denial of a requested continuance, and it did not reflect upon the substantive merits of the underlying lawsuit.

Accordingly, the trial court properly struck Pearls malicious prosecution cause of action.

The breach of contract and rescission causes of action

Deitch contends that Pearls contract claims are legally insufficient since Pearl waived them by not counter-claiming in Deitchs lawsuit against Pearl. However, Deitchs compulsory counter claim argument (see  426.30, subd. (a)) was not brought before the trial court in her anti-SLAPP motion to strike. Thus, Pearl was denied the opportunity to respond at the trial level, and we are now properly precluded from belated consideration of the issue on appeal. (See Telles Transport, Inc. v. Workers Comp. Appeals Bd. (2001) 92 Cal.App.4th 1159, 1167; In re Marriage of S. (1985) 171 Cal.App.3d 738, 745.) Indeed, Pearl asserts that if this argument had been raised in the trial court, he would have been able to explain to the trial court that he did seek leave to file a cross-complaint, but the motion was denied as premature and Mr. Pearl was directed to file his complaint after his defense of Deitchs action against him. Also, Deitchs lawsuit was ultimately dismissed without prejudice, with no conclusion on the merits, allowing either party to file any timely lawsuit in relation to the agreements at issue.

Equally without merit is Deitchs contention as to the purported absence of damages. To the contrary, Pearl sufficiently established that he suffered damages as a result of Deitchs breach of contract (the settlement agreement) and alleged more than merely bare allegations [in an] unverified complaint. (Navellier v. Sletten (2003) 106 Cal.App.4th 763, 776.) Pearls attorney provided a declaration with an accompanying invoice history listing various dates, fees, costs, and bill totals. Although the invoice is not particularly illuminating as to the specific work performed, the attorneys declaration specified that it summarized the attorney fees and costs reasonably incurred in prosecuting and resolving the first lawsuit, filed against Ms. Deitch, and in defending the second lawsuit, filed by Ms. Deitch, on behalf of Gary Pearl. Moreover, a showing of attorney fees incurred, and not necessarily those actually expended, is sufficient to demonstrate damages for a breach of contract claim (as well as the rescission and restitution claim). (See PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1097; Stevens v. Chisolm (1919) 179 Cal. 557, 564-565.)

Nor is there any merit to Deitchs assertion that the contract claims are legally insufficient because Pearl failed to identify any promise Deitch breached. Specifically, Deitch contends--again for the first time and belatedly on appeal--that Deitch never promised not to sue, and that the mutual release did not create any contractual duties. Here, the settlement agreement provided that each party was to release the other for all claims and obligations arising from the dispute between them. The release provision specifically stated that it was not intended by the Parties to apply to claims which arise under the terms of this Agreement [, and] [t]he releases within this agreement do not apply to any acts, claims or damages which occurred after [the date of this agreement,] July 31, 2002. However, the agreement further specified that as of the date of the settlement agreement, Deitch deemed the then existing condition of the premises as acceptable.

Construing the plain meaning of the language of the settlement agreement and its release provisions (Vaillette v. Firemans Fund Ins. Co. (1993) 18 Cal.App.4th 680, 686), Deitch cannot now repudiate her acknowledgement of the condition of the premises as acceptable as of July 31, 2002, by seeking to sue Pearl for conditions existing prior to that date. Therefore, when Deitch signed the settlement agreement, she waived her right to seek damages for any pre-existing conditions, and a lawsuit by Deitch contrary to that waiver would constitute a breach of the settlement agreement permitting a breach of contract claim (as well as the rescission and restitution claim). The trial court so indicated, and we agree with that preliminary determination.

Deitch also contends that Pearls contract claims constitute an invalid collateral attack on a stipulated judgment. Although the dismissal upon the stipulation of the parties is a judgment on the merits and bars further litigation of the same claim (Gagnon Co., Inc. v. Nevada Desert Inn (1955) 45 Cal.2d 448, 454), once new or additional facts are alleged or arise that alter the original pleadings dismissed, even a prior dismissal with prejudice is not a bar to the subsequent action. (Wells v. Marina City Properties, Inc. (1981) 29 Cal.3d 781, 789.) Here, Deitch has now arguably breached the settlement agreement by suing Pearl for damages arising prior to July 31, 2002, and Pearl is seeking to rescind, with restitution, his waiver of rights that was his consideration for the settlement agreement executed after his prior lawsuit. Since this claim against Deitch was not even available at the time Pearl filed his first lawsuit, the previous dismissal has no effect on Pearls claim.

Also unavailing are Deitchs other arguments as to Pearls claim seeking restitution after rescission. A party to a contract may rescind if there is a material breach by the other party. (Pennel v. Pond Union School Dist. (1973) 29 Cal.App.3d 832, 838; see Civ. Code,  1689, subd. (b)(2).) To the extent Deitch has breached the settlement agreement by failing to honor the releases therein, this would constitute a material breach and warrant seeking relief based on rescission. Nor is the rescission claim barred by laches. Although a party to a contract claiming rescission must act promptly upon discovering the facts which entitle him to rescind (Civ. Code,  1691) to avoid delay that may be substantially prejudicial to the other party (Civ. Code,  1693), the record on appeal contains no evidence of substantial prejudice.^[4]

Accordingly, the trial court properly denied Deitchs anti-SLAPP motion to strike as to the contract and rescission causes of action.

IV. Attorney Fees and Costs Awarded by the Trial Court

The anti-SLAPP statute contains a mandatory provision for attorney fees and costs to the prevailing party. ( 425.16, subd. (c ); Pfeiffer Venice Properties v. Bernard (2002) 101 Cal.App.4th 211, 215.) Pearl contends that in the event he prevails in reversing the trial courts ruling on the anti-SLAPP motions regarding the malicious prosecution causes of action, Deitch and her attorneys would no longer be prevailing parties and thus no longer entitled to attorney fees and costs. However, as previously discussed, the malicious prosecution causes of action were properly stricken pursuant to the anti-SLAPP motion.

Accordingly, there is no basis for reversing the award of attorney fees and costs.

DISPOSITION

The orders under review are affirmed. Each party is to bear its own costs on appeal.

NOT TO BE PUBLISHED IN OFFICIAL REPORTS.

BOREN, P.J.

We concur:

DOI TODD, J.

CHAVEZ, J.

Publication Courtesy of California attorney referral.

Analysis and review provided by Vista Property line Lawyers.

^[1] SLAPP is an acronym for strategic lawsuit against public participation. (Wilcox v. Superior Court (1994) 27 Cal.App.4th 809, 813, overruled in part on other grounds in Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 68, fn. 5.)

^[2] All further statutory references are to the Code of Civil Procedure, unless otherwise indicated. Section 425.16 is also called the anti-SLAPP statute.

^[3] In the present appeal, Pearl does not dispute the striking of the fraud cause of action.

^[4] We note that Deitch attempted to present on appeal evidence of the dramatic increase in housing prices, but we declined to take judicial notice of the documents proffered.