Sycamore Ridge Apartments v. Naumann

Filed 4/6/07 Sycamore Ridge Apartments v. Naumann CA4/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

APPEAL from orders of the Superior Court of San Diego County, Joan M. Lewis, Judge. Reversed.

I.

INTRODUCTION

Plaintiff Sycamore Ridge Apartments, LLC (Sycamore Ridge) appeals from orders of the trial court granting the defendants' motions to strike under the anti-SLAPP law. Defendants Megan Pukahi, William H. Naumann, Christopher H. Hagen, Lisa D. Stepp, Steven M. Nunoz, and Naumann & Levine LLP (collectively Naumann defendants) and Jeffrey LaFave and LaFave & Rice (jointly LaFave defendants) filed the anti-SLAPP motions in response to Sycamore Ridge's malicious prosecution action against them, arising from Pukahi's participation as a plaintiff in Gonzalez, et al. v. Sycamore Ridge Apartments LLC, et al. (Case No. GIC812933) (Gonzalez).

The Naumann defendants originally filed the complaint in Gonzalez on behalf of 45 plaintiffs who lived and/or worked at Sycamore Ridge. Pukahi and her husband were two of the 45 plaintiffs. The complaint set forth 18 causes of action alleging that Sycamore Ridge failed to maintain the apartments in a habitable condition, and that Sycamore Ridge engaged in unfair business practices pertaining to tenants and former Sycamore Ridge employees. Through discovery, it became apparent that Pukahi had no complaints about the habitability of her apartment, and that her only complaint was that Sycamore Ridge had retained her $300 security deposit and had charged her an additional amount for cleaning and/or repair costs. Pukahi and her husband both sought to end their participation in the litigation when Pukahi's husband faced sanctions for failing to appear for his deposition. Pukahi voluntarily dismissed her portion of the lawsuit without prejudice. Sycamore Ridge then offered to waive costs if Pukahi and her husband would agree that the dismissal of their claims would be with prejudice. Pukahi and her husband accepted Sycamore Ridge's offer.

Sycamore Ridge subsequently filed a malicious prosecution action against Pukahi and her attorneys. The defendants responded by filing anti-SLAPP motions. The trial court granted both the Naumann defendants' and the LaFave defendants' anti-SLAPP motions, concluding that Sycamore Ridge had failed to establish a probability of success in its malicious prosecution action because there was no evidence that the defendants harbored malice in initiating or maintaining Pukahi's claims against Sycamore Ridge.

On appeal, Sycamore Ridge contends that the trial court erred in granting the defendants' anti-SLAPP motions because Sycamore Ridge established a probability of succeeding on its malicious prosecution claims. Specifically, Sycamore Ridge asserts that the evidence establishes that there was no probable cause to support Pukahi's portion of the lawsuit and that her claims were prosecuted with malice.

We conclude that Sycamore Ridge demonstrated a probability of prevailing on its malicious prosecution claim,^[1]and that the trial court thus erred in granting defendants' anti-SLAPP motions.

II.

FACTUAL AND PROCEDURAL BACKGROUND

A. The underlying lawsuit against Sycamore Ridge

In 2002, a Sycamore Ridge tenant contacted the Naumann defendants, complaining about the conditions at the apartment complex. An investigation into the complaints allegedly revealed high airborne readings of aspergillus/penicillium spores, maintenance deficiencies, roof leaks, vermin infestations, and flying termites at Sycamore Ridge.

On December 12, 2002, the Naumann defendants sent unsolicited letters to all tenants of Sycamore Ridge informing them of the complaints of health problems suffered by some tenants. Included with the letter were contingency fee agreements to be signed and returned by those tenants who wished to be represented by the Naumann defendants in future litigation against Sycamore Ridge.

Pukahi and her husband signed and returned the fee agreement, and Pukahi subsequently met with the Naumann defendants to discuss her complaints. At the meeting, Pukahi expressed concerns about her husband, who had been ill during the months they lived at Sycamore Ridge. She was also upset that Sycamore Ridge had failed to return her security deposit and had charged her an additional amount for cleaning and repair of the unit, which she felt she did not owe.

In June 2003, the Naumann defendants filed a complaint against Sycamore Ridge on behalf of 45 plaintiffs, including Pukahi. The complaint set forth 18 causes of action arising out of allegations of poor living conditions at Sycamore Ridge and unfair business practices by Sycamore Ridge management. According to the Naumann defendants' appellate brief, Pukahi stated a claim under 14 of the causes of action.^[2]

From the complaint, it appears that all plaintiffs were complainants in all of the counts alleged.^[3] The damages alleged on behalf of the plaintiffs as a group, exceeded $4,000,000.

Sycamore Ridge propounded form interrogatories to Pukahi. In her responses, which were served in October 2003, Pukahi provided no substantive responses to any of the interrogatories. Instead, she objected to each interrogatory on the ground that the term "incident" was vague and ambiguous. Pukahi also stated that discovery and investigation were ongoing, and reserved her right to supplement her responses. Pukahi verified a second set of responses to the interrogatories in November 2003, and served those responses in December 2003. The second set of responses included some substantive information. Pukahi indicated in these responses that she did not have any complaints concerning mold, and that she was not claiming damages attributable to mold. Pukahi stated that she was not claiming any property damage, lost earnings or lost future earnings, or any injury "at this time." She did allege that Sycamore Ridge had not been honest with regard to her security deposit and the repair fees it had charged her.

On December 9, 2003, the Naumann defendants filed a statement of damages on behalf of Pukahi. The statement of damages asserted that Pukahi had incurred the following damages: $20,000 in pain and suffering, $20,000 in emotional distress, $5,000 in medical expenses, $30,000 in future medical expenses, $2,000 in loss of earnings, $2,000 in property damage, and $50,000 in punitive damages.

Sycamore Ridge took Pukahi's deposition on April 19, 2004. During the deposition, Pukahi admitted that she had no complaints about mold problems. She had seen no signs of mold while she lived at Sycamore Ridge, and had suffered no health problems as a result of mold. Her only complaints about Sycamore Ridge concerned her security deposit and repair charges.

During Pukahi's deposition, opposing counsel showed her the statement of damages that the Naumann defendants had filed on her behalf. Pukahi testified that she had not seen the document before, and said she did not understand the document or what was being claimed in it. She stated that although she was not alleging a claim for loss of consortium, which counsel described to her as "hurt . . . marital relations," she was making her claims as the "spouse of [her] husband who [was] claiming personal or physical injury," and also in relation to her security deposit.

On October 5, 2004, the LaFave defendants appeared in the case on the plaintiffs' behalf after filing an association of counsel form with the court.

Pukahi voluntarily dismissed her claims without prejudice on November 19, 2004. The claims of 15 other plaintiffs were voluntarily dismissed at the same time. Pukahi stated that she requested dismissal of her complaint because she did not like litigation. After receiving a letter from Sycamore Ridge's counsel offering to waive costs if Pukahi would agree that the dismissal be with prejudice, the Naumann defendants filed a dismissal with prejudice on Pukahi's behalf on January 20, 2005.^[4]

B. Sycamore Ridge's malicious prosecution action against the Naumann

and LaFave defendants

Sycamore Ridge filed a complaint for malicious prosecution against the Naumann and LaFave defendants on September 9, 2005.^[5] Sycamore Ridge alleged in its complaint that the Naumann and LaFave defendants had filed and/or prosecuted Pukahi's claims without probable cause, and that the defendants had maintained Pukahi's portion of the lawsuit in bad faith, maliciously, and without probable cause.

C. The defendants' anti-SLAPP motions

The Naumann defendants filed a special motion to strike under Code of Civil Procedure^[6]section 425.16, the anti-SLAPP law, on October 7, 2005. In their motion, the Naumann defendants asserted that Pukahi's portion of the lawsuit had not been terminated favorably to Sycamore Ridge, that her claims were brought with probable cause, that they were not filed with malice, and that Sycamore Ridge could not prove it had suffered damages as a result of Pukahi's claims.

The LaFave defendants filed their own special motion to strike under section 425.16 on October 11, 2005. In their motion, the LaFave defendants contended that they had not become involved in the Gonzales litigation until August 31, 2004, that their participation was limited to providing expertise concerning mold, and that they had not had any contact with Pukahi.

Sycamore Ridge filed an opposition to the Naumann defendants' anti-SLAPP motion on October 24, 2005, and filed an opposition to the LaFave defendants anti-SLAPP motion on November 7, 2005.

D. The trial court's orders concerning the defendants' anti-SLAPP motions

The trial court heard the Naumann defendants' anti-SLAPP motion on November 4, 2005, and took the matter under submission. On November 17, the court entered an order granting the Naumann defendants' anti-SLAPP motion, ruling that Sycamore Ridge had not demonstrated a probability that it would prevail in its malicious prosecution action on the element of lack of probable cause. The court also ruled that Sycamore Ridge had not demonstrated that either Pukahi or the Naumann defendants had acted with malice in bringing and/or maintaining the underlying action.

On November 21, the trial court tentatively ruled that Sycamore Ridge had not met its burden of demonstrating a probability that it would prevail against the LaFave defendants in its malicious prosecution action on the elements of lack of probable cause and malice. The court heard argument from counsel and took the matter under submission. On December 5, 2005, the trial court granted the LaFave defendants' anti-SLAPP motion. In addition to ruling on the merits of the anti-SLAPP motion, the court rejected Sycamore Ridge's argument that the LaFave defendants' motion was untimely.

On January 11, 2006, Sycamore Ridge filed a timely notice of appeal as to both of the court's orders.^[7]

III.

DISCUSSION

A. The law governing anti-SLAPP motions

"Whether section 425.16 applies, and whether the plaintiff has shown a probability of prevailing, are both questions we review independently on appeal." (Kashian v. Harriman (2002) 98 Cal.App.4th 892, 906; see also HMS Capital, Inc. v. Lawyers Title Co. (2004) 118 Cal.App.4th 204, 212 (HMS Capital) [orders granting anti-SLAPP motions are reviewed de novo].)

Section 425.16 provides in pertinent part:

"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 or 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." ( 425.16, subd. (b)(1).)

Resolution of a special motion to strike "requires the court to engage in a two-step process. First, the court decides whether the defendant has made a threshold showing that the challenged cause of action is one arising from protected activity. The moving defendant's burden is to demonstrate that the act or acts of which the plaintiff complains were taken 'in furtherance of the [defendant]'s right of petition or free speech under the United States or California Constitution in connection with a public issue,' as defined in the statute. [Citation.] If the court finds such a showing has been made, it then determines whether the plaintiff has demonstrated a probability of prevailing on the claim." (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67 (Equilon).)

For purposes of an anti-SLAPP motion, "[t]he court considers the pleadings and evidence submitted by both sides, but does not weigh credibility or compare the weight of the evidence. Rather, the court's responsibility is to accept as true the evidence favorable to the plaintiff. . . ." (HMS Capital, supra, 118 Cal.App.4th. at p. 212.)

Further, a plaintiff "need only establish that his or her claim has 'minimal merit' [citation] to avoid being stricken as a SLAPP. [Citations.]" (Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 291 (Soukup).)

B. Sycamore Ridge's claim arises from a protected activity

The Naumann and LaFave defendants met their burden to show that Sycamore Ridge's malicious prosecution action arose from their protected petitioning activities. A protected activity is "any act" that is completed "in furtherance of the person's right of petition or free speech under the United States or California Constitution in connection

with a public issue." ( 425.16, subd. (b)(1).) Filing a lawsuit is an exercise of a party's constitutional right of petition (Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th 1106, 1115 (Briggs), and claims for malicious prosecution may thus be subject to the anti-SLAPP statute. (Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 733-741 (Jarrow).) Sycamore Ridge appears to concede that its claim for malicious prosecution arose from a protected activity on the part of the Naumann and LaFave defendants. Thus, the pertinent question on appeal is whether Sycamore Ridge met its burden to present sufficient evidence to demonstrate a probability of prevailing on its malicious prosecution claim.

C. Sycamore Ridge has demonstrated a probability of prevailing on its

malicious prosecution claim

Sycamore Ridge had the burden to present evidence sufficient to demonstrate a probability that it would prevail on its malicious prosecution claim against the Naumann and LaFave defendants. ( 425.16, subd. (b)(2); Navellier (2002) 29 Cal.4th 82, 89; Equilon, supra, 29 Cal.4th at p. 67.) "[T]he plaintiff 'must demonstrate that the complaint is both legally sufficient and supported by a sufficient prima facie showing of facts to sustain a favorable judgment if the evidence submitted by the plaintiff is credited." ' [Citations.]" (Navellier, supra, 29 Cal.4th at pp. 88-89.)

In order to establish a claim against the Naumann and LaFave defendants for malicious prosecution, Sycamore Ridge must plead and prove that the prior action " '(1) was commenced by or at the direction of the defendant and was pursued to a legal termination in [Sycamore Ridge's], favor [citations]; (2) was brought without probable cause [citations]; and (3) was initiated with malice [citations].' [Citation.]" (Crowley v. Katleman (1994) 8 Cal.4th 666, 676 (Crowley).)

"[C]ontinuing to prosecute a lawsuit discovered to lack probable cause" may also support a claim of malicious prosecution. (Zamos v. Stroud (2004) 32 Cal.4th 958, 973 (Zamos).) "Continuing an action one discovers to be baseless harms the defendant and burdens the court system just as much as initiating an action known to be baseless from the outset." (Id. at p. 969.) "A person who had no part in the commencement of the action, but who participated in it at a later time, may be held liable for malicious prosecution." (Paramount General Hospital Co. v. Jay (1989) 213 Cal.App.3d 360, 366, disapproved in part on other grounds in Staffpro, Inc. v. Elite Show Services, Inc. (2006) 136 Cal.App.4th 1392, 1404, citing Lujan v. Gordon (1977) 70 Cal.App.3d 260, 263-264.)^[8]

A claim for malicious prosecution may also apply to a defendant who has brought an action charging multiple grounds of liability when some, but not all, of the grounds were asserted without probable cause and with malice. (Crowley, supra, 8 Cal.4th at p. 671, citing Bertero v. National General Corp. (1974) 13 Cal.3d 43 (Bertero).)

1. Sycamore Ridge presented evidence to support the allegation that

the underlying litigation was terminated in its favor

"The theory underlying the requirement of favorable termination is that it tends to indicate the innocence of the accused, and coupled with the other elements of lack of probable cause and malice, establishes the tort [of malicious prosecution]." (Jaffe v. Stone (1941) 18 Cal.2d 146, 150.) "It is hornbook law that the plaintiff in a malicious prosecution action must plead and prove that the prior judicial proceeding of which he complains terminated in his favor." (Babb v. Superior Court (1971) 3 Cal.3d 841, 845.)

A " 'favorable' termination does not occur merely because a party complained against has prevailed in an underlying action. While the fact he has prevailed is an ingredient of a favorable termination, such termination must further reflect on his innocence of the alleged wrongful conduct. If the termination does not relate to the merits--reflecting on neither innocence of nor responsibility for the alleged misconduct--the termination is not favorable in the sense it would support a subsequent action for malicious prosecution." (Lackner v. La Croix (1979) 25 Cal.3d 747, 751 (Lackner).)

'[W]hen the underlying action is terminated in some manner other than by a judgment on the merits, the court examines the record "to see if the disposition reflects the opinion of the court or the prosecuting party that the action would not succeed." ' [Citations.] (Ross v. Kish (2006) 145 Cal.App.4th 188, 198.) " 'Should a conflict arise as to the circumstances of the termination, the determination of the reasons underlying the dismissal is a question of fact. [Citation.]' " (Ibid.)

The Lackner court quoted with approval several examples that the appellate court in Minasian v. Sapse (1978)80 Cal.App.3d 823, 827 considered illustrative of terminations that may or may not be deemed favorable:

" 'In some instances the manner of termination reflects the opinion of the court that the action lacks merit, as where the criminal proceedings are dismissed for lack of sufficient evidence of guilt following a preliminary hearing. [Citation omitted.] In others, the termination reflects the opinion of the prosecuting party that, if pursued, the action would result in a decision in favor of the defendant, as where the district attorney seeks dismissal of the prosecution of a criminal action for lack of evidence [citations omitted] or where the plaintiff in a civil proceeding voluntarily dismisses the action [citations omitted]. By way of contrast, a dismissal . . . for lack of jurisdiction [citation] not only is not on the merits, it is unreflective of the merits; neither the judgment of the court nor that of the prosecuting party on the merits is implicated in the dismissal.' " (Lackner, supra, 25 Cal.3d at p. 750, quoting Minasian, supra, 80 Cal.App.3d at p. 827.)

The defendants challenge whether the voluntary dismissal of Pukahi's claims should be considered a favorable termination. A voluntary dismissal is presumed to be a favorable termination on the merits, unless otherwise proved to a jury. (Weaver v. Superior Court (1979) 95 Cal.App.3d 166, 185, disapproved on other grounds in Sheldon Appel Co. v. Albert & Oliker (1989) 47 Cal.3d 863, 882 (Sheldon Appel).) This is because " '[a] dismissal for failure to prosecute . . . does reflect on the merits of the action [and in favor of the defendant] . . . . The reflection arises from the natural assumption that one does not simply abandon a meritorious action once instituted.' " (Lackner, supra, 25 Cal.3d at pp. 750-751.)

Citing Pender v. Radin (1994) 23 Cal.App.4th 1807, 1810 (Pender), the Naumann and LaFave defendants contend that there was no favorable termination here because the dismissal was the result of a negotiated settlement, in that Sycamore Ridge agreed to waive costs if Pukahi would agree to dismiss her portion of the lawsuit with prejudice. In Pender, the court determined that the defendants agreeing to a waiver of fees and costs in exchange for terminating the litigation constituted a settlement, even where the defendants had not agreed to pay anything to the plaintiff. (Id. at p. 1814.)

The situation in this case is distinguishable from that in Pender. Pukahi voluntarily dismissed her claims prior to any discussions regarding a waiver of costs.

" '[A] voluntary dismissal, even one without prejudice, may be a favorable termination which will support an action for malicious prosecution. [Citation.] In most cases, a voluntary unilateral dismissal is considered a termination in favor of the defendant in the underlying action; the same is true of a dismissal for failure to prosecute. [Citations.] [Citation.]' " (Fuentes v. Berry (1995) 38 Cal.App.4th 1800, 1808.)

Although Pukahi had not given up her option to file a new action against Sycamore Ridge at the time she voluntarily dismissed her claims, the underlying action was terminated upon the dismissal. The fact that Pukahi later agreed to give up her right to file another suit against Sycamore Ridge in exchange for a waiver of costs does not alter the fact that she unilaterally voluntarily dismissed her claims. Additionally, the evidence Sycamore Ridge presented in opposition to the special motion to strike permits the reasonable inference that the allegations of mold contamination and personal injuries brought on behalf of Pukahi were groundless, and that the voluntary dismissal was motivated by a recognition that most of the claims made on Pukahi's behalf in the complaint were meritless. (See Ross v. Kish (2006) 145 Cal.App.4th 188, 200 [given total lack of merit in plaintiff's claims, dismissal of a lawsuit for refusing to be deposed reflected adversely on the merits of the action based on the natural assumption that one does not simply abandon a meritorious action once instituted].) For these reasons, we conclude that Sycamore Ridge made a sufficient prima facie showing that Pukahi's claims against Sycamore Ridge were terminated in Sycamore Ridge's favor.

2. Sycamore Ridge established a prima facie showing that the Naumann

defendants lacked probable cause to prosecute all 18 counts of the complaint on behalf of Pukahi

If an action was not legally tenable when viewed in an objective manner as of the time the action was initiated or being prosecuted, the action was pursued without probable cause. The court must "determine whether, on the basis of the facts known to the defendant, the institution of the prior action was legally tenable." (Sheldon Appel, supra, 47 Cal.3d at p. 878.) "The resolution of that question of law calls for the application of an objective standard to the facts on which the defendant acted. [Citation.]" (Ibid.) The test the court is to apply is whether "any reasonable attorney would have thought the claim tenable." (Id. at p. 886.) The tort of malicious prosecution also includes the act of "continuing to prosecute a lawsuit discovered to lack probable cause." (Zamos, supra, 32 Cal.4th at p. 973.) The same standard applies "to the continuation as to the initiation of a suit." (Id. at p. 970.)

"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 untenable under the facts known to him." (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 164-165 (Sangster).)

In determining whether the prior action was legally tenable, i.e., whether the action was supported by probable cause, the court is to construe the allegations of the underlying complaint liberally, in a light most favorable to the malicious prosecution defendant. (Sangster, supra, 68 Cal.App.4th at p. 165.) Construing the allegations of Pukahi's underlying complaint in the light most favorable to her, it is clear that there was not probable cause to support all of the 18 causes of action alleged on Pukahi's behalf.^[9]

The causes of action alleged on behalf of all of the plaintiffs included negligence in failing to manage, repair and/or maintain the property; breach of contract based on allegations that Sycamore Ridge did not maintain the plumbing, heating, and electrical systems in satisfactory condition as required by the terms of the leases; and breaches of the warranty of habitability and the covenant of quiet enjoyment for failing to water/weather-proof the buildings, installing improper plumbing and gas facilities, and maintaining unclean and/or unsanitary buildings and grounds filled with filth, mold, garbage, rodents, termites, and/or vermin. The complaint also included causes of action for breach of an employment contract, wrongful termination in violation of public policy, and retaliation.

The record suggests that Pukahi never complained about any of these issues prior to the filing of the lawsuit.^[10] Nevertheless, the Naumann defendants included Pukahi as a plaintiff in the complaint, alleging 18 different causes of action on her behalf ─ the great majority of which had nothing to do with Pukahi's specific complaints concerning Sycamore Ridge. Under these circumstances, it is difficult to conclude that a reasonable attorney would have believed that Pukahi possessed tenable claims under a number of the causes of action alleged in the complaint as filed.

Regardless of whether the facts known to the Naumann defendants at the time the action was initiated supported all of the legal theories presented in the complaint, it became clear after Pukahi provided substantive responses to the interrogatories that she had no complaints of personal injury or property damage. In those responses, Pukahi's answer to the question, "Do you attribute any physical, mental, or emotional injuries to the INCIDENT?" was "Not at this time." In response to the question, "Do you attribute any loss of or damage to a vehicle or other property to the INCIDENT?" Pukahi answered, "No." In response to the question, "Do you attribute any loss of income or

earning capacity to the INCIDENT?" Pukahi answered "No." These responses established that Pukahi was not claiming personal injuries, property damage, or lost income. Yet the Naumann defendants not only failed to dismiss Pukahi's causes of action based on personal injury and/or property damage, but they took the affirmative step of filing a statement of damages on Pukahi's behalf in which they asserted monetary damages that were inconsistent with Pukahi's discovery responses and had no apparent

basis in fact. The statement of damages alleged that she had suffered $5,000 in medical expenses, $30,000 in future medical expenses, $2,000 in lost wages, and $2,000 in property damage. Pukahi stated during her deposition that she had never seen, let alone approved, this statement of damages.

There is no question that after Pukahi's deposition in April 2004, there was simply no factual basis to support the majority of the causes of action alleged on Pukahi's behalf in the complaint. During her deposition, Pukahi admitted she had no complaints about mold or other health concerns at Sycamore Ridge, and that the only harm she was personally alleging arose out of her allegation that Sycamore Ridge did not refund her $300 security deposit and had charged her an additional $140 for cleaning and repairs after she moved out.

On the basis of the information elicited during Pukahi's deposition, the only causes of action Pukahi might have had any grounds to bring were (1) the fifth cause of action, for unfair business practices pursuant to Business & Professions Code section 17200, et seq., based on allegations that Sycamore Ridge had improperly retained security deposits, overstated the nature and necessity of repairs, and used false documents to substantiate repair charges among others; (2) the ninth cause of action, for fraud and deceit, in which it was alleged that Sycamore Ridge had misrepresented the condition of the units and the cost of repairs in order to withhold tenants' security deposits; and (3) the eleventh cause of action, for violation of Civil Code sections 1950.5 and 1950.7, which prohibits landlords from using security deposits to repair preexisting defective conditions or damage to the unit, and/or ordinary wear and tear, and limits landlords to taking only an amount that is "reasonably necessary" to remedy tenant defaults or to repair damage caused by the tenant. There was no probable cause to support the other 15 causes of action alleged in the complaint as to Pukahi. The Naumann defendants nevertheless continued to prosecute the action on Pukahi's behalf until November 2004approximately seven months after Pukahi's deposition. Sycamore Ridge has demonstrated a sufficient prima facie showing of facts to support its allegation that the defendants lacked probable cause to maintain a number of the claims alleged on Pukahi's behalf.

3. Sycamore Ridge presented evidence to demonstrate a probability that it

would prevail on the element of the defendants' malicious intent

a. The Naumann defendants

The malice element of the malicious prosecution tort goes to the defendant's subjective intent in initiating the prior action. (Sheldon Appel, supra, 47 Cal.3d at p. 874.) The mere absence of probable cause without more "is not sufficient to demonstrate malice." (Downey Venture v. LMI Ins. Co. (1998) 66 Cal.App.4th 478, 498-499, fn. 29.) For purposes of a malicious prosecution claim, malice "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 (Sierra Club).) "Suits with the hallmark of an improper purpose" include, but are not necessarily limited to, "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." ' " (Sierra Club, supra, 72 Cal.App.4th at p. 1157.)

Evidence tending to show that the defendants did not subjectively believe that the action was tenable is relevant to whether an action was instituted or maintained with malice. (Sheldon Appel, supra, 47 Cal.3d at p. 881.) Additionally, "if the trial court determines that the prior action was not objectively tenable, the extent of a defendant attorney's investigation and research may be relevant to the further question of whether or not the attorney acted with malice." (Id. at p. 883.)

There is abundant evidence that the defendants continued to prosecute this action on Pukahi's behalf despite being aware that there was no basis for most of her claims. Sycamore Ridge presented evidence that the Naumann defendants were aware of the lack of facts to support the majority of Pukahi's claims, since they were the ones who prepared Pukahi's interrogatory responses. The evidence also suggests that, at a minimum, after Pukahi's deposition on April 19, 2004, the Naumann defendants became aware of facts demonstrating that Pukahi had no claims under most of the causes of action alleged in the complaint, and that there was no factual basis to support her claim for nearly $80,000 in damages arising from allegations of injury or illness resulting from mold or the other poor conditions alleged to have existed at Sycamore Ridge. Yet, the Naumann defendants continued to pursue the action on Pukahi's behalf. The evidence Sycamore Ridge presented demonstrates a complete indifference on the part of the Naumann defendants as to whether the claims alleged by Pukahi had any basis in fact.

There is also evidence that would support the conclusion that the proceedings were initiated and maintained in order to force Sycamore Ridge to enter into a settlement unrelated to the merits of Pukahi's claims. (See Sierra Club, supra, 72 Cal.App.4th at p. 1157.) Although the statement of damages was not a settlement demand, it is an indication that the defendants were seeking damages for which they knew there was no factual basis. The document was filed after Pukahi had provided responses to the interrogatories in which she stated that she had suffered no personal injury related damages. There was thus no basis at all for the dollar figures set forth in the statement of damages. According to Pukahi, she had never even seen the statement of damages the Naumann defendants filed on her behalf. At her deposition, she appeared not to understand the purpose or meaning of the document.

Even if one assumes that the Naumann defendants filed the statement of damages in error or that some sort of mix-up caused them to erroneously assert the damages allegations on Pukahi's behalf, it was clear after her deposition that there was no basis for the majority of her claims. Nevertheless, the defendants did not dismiss those claims until November 19, 2004 ─ seven months after Pukahi's deposition. The defendants claim that they required this time in order to gather the other plaintiffs whose complaints were also going to be dismissed. However, once it became clear that there was no basis for a number of Pukahi's claims, the defendants should have dismissed the claims immediately. "Continuing an action one discovers to be baseless harms the defendant and burdens the court system just as much as initiating an action known to be baseless from the outset." (Zamos, supra, 32 Cal.4th at p. 969.)

This case has a number of "hallmark[s]" (Sierra Club, supra, 72 Cal.App.4th at p. 1157) of a suit brought for an improper purpose. A reasonable inference based on all of this evidence is that Pukahi's lawsuit, in which she claimed 15 causes of action that had no support in fact, was brought for an improper purpose, within the meaning of Sierra Club, supra, 72, Cal.App.4th at page 1157. At a minimum, the record discloses that the Naumann defendants' failed to conduct any reasonable investigation with regard to Pukahi's complaints, and that they served a statement of damages on Sycamore Ridge that had no apparent basis in fact.

b. The LaFave defendants

The LaFave defendants cannot escape potential liability simply because they entered the case after it was well underway. It is clear that one may be held liable for malicious prosecution for continuing to prosecute an action after discovering that the action lacks probable cause. (Zamos, supra, 32 Cal.4th at p. 970.) Further, one may be liable for malicious prosecution for prosecuting an action even if he or she did not institute the action: "There does not appear to be any good reason not to impose liability upon a person who inflicts harm by aiding or abetting a malicious prosecution which someone else has instituted." (Lujan v. Gordon (1977) 70 Cal.App.3d 260, 264 (Lujan).)^[11]Thus, although the LaFave defendants did not institute the action on Pukahi's behalf, this fact alone does not insulate them from potential liability.

At the time the LaFave defendants associated into the case in October 2004, Pukahi had responded to interrogatories and her deposition had been taken. It was clear from Pukahi's responses to interrogatories and from her deposition testimony that there was no probable cause to maintain many of her claims. It should thus have been clear to the LaFave defendants, just as it should have been clear to the Naumann defendants, that the only possible meritorious claims Pukahi might have would be related to Sycamore Ridge's alleged failure to return her security deposit and its demand for additional cleaning and repair costs ─ claims worth less than $1,000. By associating into the case, the LaFave defendants adopted all of Pukahi's claims, including a large number of untenable claims. Sycamore Ridge has made a sufficient showing that the probable cause prong of its malicious prosecution claim against the LaFave defendants has the "minimal merit" necessary to defeat the LaFave defendants' anti-SLAPP motion.

This same evidence establishes a sufficient showing of malice, for the limited purpose of defeating the LaFave defendants' special motion to strike. "Malice 'may range anywhere from open hostility to indifference. [Citations.] Malice may also be inferred from the facts establishing lack of probable cause.' [Citation.]" (Soukup, supra, 39 Cal.4th at p. 292 [malice may be inferred from evidence that defendant lacked probable cause to initiate and maintain the action].) As we discussed earlier, "[T]he extent of a defendant attorney's investigation and research may be relevant to the further question of whether or not the attorney acted with malice." (Sheldon Appel, supra, 47 Cal.3d at p. 883.)

At the time the LaFave defendants associated in as cocounsel for the plaintiffs, the state of discovery was such that the LaFave defendants knew, or at a minimum, should have known, that the vast majority of Pukahi's claims lacked probable cause. If the LaFave defendants knew the relevant facts and did not take immediate steps to dismiss the unmeritorious claims, one could infer that the continued prosecution of the meritless claims was motivated by a malicious intent. If the LaFave defendants were not aware of the relevant facts because they failed to adequately familiarize themselves with the pending case prior to associating in as counsel, this would indicate indifference, from which malice could be inferred. (See Sheldon Appel, supra, 47 Cal.3d at p. 883.)

The LaFave defendants contend that because Pukahi made the decision not to pursue her case in August 2004, and they did not associate into the case until October, they cannot be deemed to have prosecuted her claims. However, Pukahi's asserted intention not to pursue her claims was not disclosed to Sycamore Ridge. The case remained open for approximately a month after the LaFave defendants associated into the action.^[12]

5. Sycamore Ridge sufficiently establish that it was damaged by the

defendants' conduct

The Naumann and LaFave defendants argue that Sycamore Ridge did not present sufficient evidence that it was damaged by the prosecution of Pukahi's complaint and, therefore, that Sycamore Ridge could not establish a prima facie case of malicious prosecution.

The Naumann defendants contend that Sycamore Ridge cannot establish that it suffered damages because it waived costs up to the time of the dismissal with prejudice, and because it continued to litigate the claims of the other plaintiffs and therefore lost nothing by also litigating Pukahi's case under the same complaint at the same time. The LaFave defendants contend that because they had no involvement in filing the original

litigation and "did not do anything with regard to continuing the litigation of the Pukahi claim," Sycamore Ridge could not have suffered any damages as a result of the LaFave defendants' conduct. We disagree with the defendants' contentions.

First, the defendants cite no authority establishing that a malicious prosecution plaintiff must also present evidence of the facts supporting the damages alleged in order to establish a probability of prevailing on a malicious prosecution claim. Rather, the weight of authority appears to hold that a malicious prosecution plaintiff must establish three elements, i.e., that the prior action (1) was commenced by or at the direction of the defendant and was pursued to a legal termination in plaintiff's favor, (2) was brought without probable cause, and (3) was initiated with malice, in order to succeed on that cause of action. (See, e.g., Crowley, supra, 8 Cal.4th at p. 676.) In order to be granted monetary relief, a malicious prosecution plaintiff must also prove damages. However, it is not clear that for purposes of surviving an anti-SLAPP motion, a malicious prosecution plaintiff must provide specific evidence of the extent of the damages suffered, since the claim is actionable precisely because the malicious prosecution has injured the defendant in the underlying action:

"The malicious commencement of a civil proceeding is actionable because it harms the individual against whom the claim is made, and also because it threatens the efficient administration of justice. The individual is harmed because he is compelled to defend against a fabricated claim which not only subjects him to the panoply of psychological pressures most civil defendants suffer, but also to the additional stress of attempting to resist a suit commenced out of spite or ill will, often magnified by slanderous allegations in the pleadings." (Bertero v. National General Corp. (1974) 13 Cal.3d 43, 50-51 (Bertero).)

Further, there is sufficient evidence in this record to support Sycamore Ridge's assertions that it suffered damage as a result of the Pukahi's claims. A plaintiff who successfully asserts a malicious prosecution claim can obtain reasonable attorney's fees incurred defending against the prior action, and also may recover compensation for injury to reputation or impairment of social and business standing in the community. (Bertero, supra, 13 Cal.3d at pp. 59-64.) The record is replete with evidence that Sycamore Ridge's attorneys spent time defending against Pukahi's complaint. Specifically, attorneys for Sycamore Ridge propounded discovery on Pukahi, deposed Pukahi, and spent time ensuring that Pukahi's claims had been dismissed. Further, there is no evidence that Sycamore Ridge waived its right to attorney's fees. With regard to the LaFave defendants' argument, although it may be true that the extent of the damages Sycamore Ridge suffered during the time the LaFave defendants were involved in Pukahi's case may be small in relation to the damages it suffered during the course of the entire Pukahi lawsuit, it is not clear that Sycamore Ridge suffered no damages as a result of the LaFave defendants' conduct in continuing to prosecute Pukahi's claims.

IV.

DISPOSITION

The orders of the trial court granting the defendants' anti-SLAPP motions are reversed. Any subsequent orders awarding attorney fees and/or costs to the defendants as the prevailing parties on the anti-SLAPP motions are also reversed. Costs are awarded to appellant Sycamore Ridge.

AARON, J.

WE CONCUR:

McCONNELL, P. J.

McDONALD, J.

Publication Courtesy of San Diego County Legal Resource Directory.

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^[1] We do not intend to suggest that Sycamore Ridge will necessarily succeed in its malicious prosecution action, but rather, only that Sycamore Ridge has met its burden to show a probability of prevailing on the merits sufficient to survive the anti-SLAPP motions.

^[2] The basis for the Naumann defendants' assertion that Pukahi had stated claims under 14 of the causes of action (or which causes of action those would have been) is unclear from the record, since the complaint did not distinguish among the plaintiffs with regard to the different causes of action.

^[3] The complaint alleges that all plaintiffs were both renters at Sycamore Ridge and that they had been employees of Sycamore Ridge. It is unlikely that all of the plaintiffs were both tenants and former employees of Sycamore Ridge. Although the complaint attempts to limit the number of plaintiffs alleging the employment causes of action by stating that those causes of action were being brought "[b]y Plaintiff Employees against Defendants" and that only "certain Plaintiffs were employed by Defendants," the complaint never identified which of the plaintiffs had been employed by Sycamore Ridge and which had not.

^[4] The Naumann and LaFave defendants continue to assert that Pukahi's claims were dismissed only because she requested dismissal, and not because her claims lacked merit.

^[5] Trial in the Gonzales action was scheduled to begin on September 9, 2005.

^[6] Further statutory references are to the Code of Civil Procedure unless otherwise indicated.

^[7] On March 10, 2006, the trial court awarded the LaFave defendants $11,700 in attorney fees and $641 in costs as the prevailing party on the special motion to strike.

^[8] Although the Naumann and LaFave defendants filed separate anti-SLAPP motions, a significant portion of the issues and arguments overlap and apply to both sets of defendants. For this reason, we need not distinguish for the most part between the Naumann and LaFave defendants in our analysis. However, to the extent that the LaFave defendants assert arguments in addition to or different from the arguments the Naumann defendants raise, due to the LaFave defendants' late participation in the prosecution of Pukahi's claims, we will separately address those arguments.

^[9] Pukahi was a named plaintiff in a complaint that made no distinctions among the 45 named plaintiffs with regard to the 18 separate causes of action. Rather, the complaint stated 18 causes of action on behalf of each named plaintiff.

^[10] In a declaration, Pukahi attests that her "husband had been very ill the entire six months we lived at our Sycamore Ridge apartment with many of the listed symptoms, and it hurt me to see him like this, so we decided to call and talk to the attorneys. We also discussed other issues with the attorneys including our security deposit, which had not been returned to us, and Sycamore Ridge's billing us for charges that we did not believe we were responsible for related to the apartment." Pukahi does not mention ever having discussed any other complaints about Sycamore Ridge with the attorneys at Naumann & Levine, LLP. Further, there is no evidence in the record to suggest that Pukahi had ever been an employee at Sycamore Ridge or that she had complaints about Sycamore Ridge related to having been employed there.

^[11] In Lujan, the malicious prosecution plaintiff named as defendants Gordon and Lipstone, two attorneys who had not instituted the underlying action. (Lujan, supra, 70 Cal.App.3d at p. 262.) The malicious prosecution plaintiff alleged that the attorney who filed the lawsuit, Jacoves, had acted as an agent of Gordon and Lipstone. (Ibid.) Gordon and Lipstone demurred to the complaint, contending that the record did not establish that they could be liable for malicious prosecution because the file showed that their firm, Gordon, Lipstone & Jacoves, had not been substituted in for Jacoves in the case. (Ibid.) The court noted that the file contained a number of documents filed on the plaintiff's behalf "with the caption the name of 'Law Offices Gordon, Lipstone & Jacoves' as 'attorneys for plaintiff.' (Id. at pp. 262-263.) The court framed the relevant question as "whether the alleged participation of Gordon and Lipstone commencing June 28, 1973, may subject them to any [malicious prosecution] liability," and answered that question in the affirmative. (Id. at p. 263.)

^[12] The LaFave defendants may be able to establish in a summary judgment motion or at trial that, from the time they associated in as cocounsel for the plaintiffs, they took steps to ensure that any unmeritorious claims were dismissed. However, at this stage of the proceedings, we do not resolve factual issues. The issue before the court at this juncture is whether, accepting Sycamore Ridge's evidence as true, Sycamore Ridge has made a sufficient showing that its claim of malicious prosecution has the minimal merit necessary to survive an anti-SLAPP motion.