Traiger v. Bicer

Filed 10/11/06 Traiger v. Bicer CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

Appeal from a judgment of the Superior Court of Orange County, Thierry Patrick Colaw, Judge. Affirmed.

Coast Law Group, Rory R. Wicks, and Christian C. Polychron from Plaintiff and Appellant.

Theodore M. Hankin for Defendant and Respondent, Jack Bicer.

* * *

Michael A. Traiger’s malicious prosecution suit against Jack Bicer was dismissed after the trial court granted Bicer’s anti-SLAPP motion to strike pursuant to Code of Civil Procedure section 425.16.[1] Traiger appeals. We affirm, concluding Traiger failed to oppose the motion with sufficient evidence showing Bicer instituted the underlying action without probable cause and with malice.

FACTS

In 1998, Bicer gave $50,000 to Traiger, a friend who had told Bicer about an opportunity to participate in a high yield trading program. Traiger, as president of Taggart Industries, Inc. (Taggart), signed a receipt for and acceptance of the $50,000 sum “to be deposited into the account of [Taggart], and thereafter, transmitted by wire, to the account of J. B. Tipton Limited at Chase Manhattan Bank, New York, New York.” The receipt stated the funds would be used in a private investment program in Tipton’s name for the benefit of Taggart, with Taggart to “share the profits received from said investment with [Bicer] such that [Bicer] shall earn & receive a targeted return equal to 25% per month for ten months within the following one year.” The receipt further allowed Bicer and Taggart to “elect to renew the investment for an additional year on terms to then be determined,” and if Bicer did not renew, Taggart would “return the initial investment of $50,000.00” to Bicer at the end of the one-year-term.

Alas, the promised returns did not materialize. After years of unsuccessful attempts to obtain information about the investment and/or achieve return of his $50,000, Bicer consulted an attorney and initiated an action against Traiger, Taggart, and Daniel J. Ryan (the individual alleged to have been in charge of the investment program),[2] alleging breach of contract, fraud, conversion, civil conspiracy, breach of the covenant of good faith and fair dealing, negligence, and negligent misrepresentation.

Traiger and Taggart moved for summary judgment, and after conducting certain discovery, Bicer dismissed without prejudice all causes of action except breach of contract and negligence. As to the breach of contract cause of action, the court denied relief to Taggart,[3] but granted summary adjudication in favor of Traiger, based on Bicer’s inability to produce evidence creating a triable issue of fact of alter-ego on which to predicate liability. Summary adjudication of the negligence cause of action in favor of Traiger was based on the complaint’s failure to allege Traiger’s independent duty to return Bicer’s investment. Traiger thus obtained summary judgment against Bicer.

Victory in hand, Traiger sued Bicer and his attorney, Michael Soroy, for malicious prosecution. In response, Bicer filed a section 425.16 anti-SLAPP motion to strike the complaint,[4] arguing Traiger would be unable to show a probability of prevailing on the malicious prosecution claim because, inter alia, he could not establish the requisite elements of lack of probable cause or malice. The trial court agreed, basing its order granting the anti-SLAPP motion on Traiger’s failure to carry his burden of showing Bicer filed the underlying action without probable cause.[5] The order results in dismissal of the complaint. (Varian Medical Systems, Inc. v. Delfino (2005) 35 Cal.4th 180, 193.)

DISCUSSION

The anti-SLAPP statute, which is to be “construed broadly“ (§ 425.16, subd. (a)), provides that “[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).) The law was intended by the Legislature “‘to dismiss at an early stage nonmeritorious litigation meant to chill the valid exercise of the constitutional rights of freedom of speech and petition in connection with a public issue.’” (Damon v. Ocean Hills Journalism Club (2000) 85 Cal.App.4th 468, 472.)

In bringing an anti-SLAPP motion, the defendant, here Bicer, bears the initial burden of establishing the targeted action is one arising from activity protected under section 425.16, subdivision (e). (Navellier v. Sletten (2002) 29 Cal.4th 82, 88.) Traiger concedes the targeted malicious prosecution action arose from activity protected under the anti-SLAPP statute. (Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 735 [“By definition, a malicious prosecution suit alleges that the defendant committed a tort by filing a lawsuit”] (Jarrow Formulas).)

Because Bicer made the requisite showing, the burden shifted to Traiger to establish through competent evidence a probability that he would prevail on the merits of the targeted claim. (§ 425.16, subd. (b)(1).) Plaintiff does this by proving “‘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.’” (Navellier v. Sletten, supra, 29 Cal.4th at pp. 88-89.)

We must therefore consider whether Traiger made a prima facie showing of facts sufficient to prevail on the malicious prosecution action. In California, “the elements of the [malicious prosecution] tort have historically been carefully circumscribed so that litigants with potentially valid claims will not be deterred from bringing their claims to court by the prospect of a subsequent malicious prosecution claim.” (Sheldon Appel v. Co. v. Albert & Oliker (1989) 47 Cal.3d 863, 872 (Sheldon Appel).) To that end, a malicious prosecution plaintiff must “‘demonstrate “that the prior action (1) was commenced by or at the direction of the defendant and was pursued to a legal termination in his, plaintiff’s, favor [citations]; (2) was brought without probable cause [citations]; and (3) was initiated with malice [citations.]”’” (Paulus v. Bob Lynch Ford, Inc. (2006) 139 Cal.App.4th 659, 673.) “In assessing the probability of prevailing, a court looks to the evidence that would be presented at trial, similar to reviewing a motion for summary judgment; a plaintiff cannot simply rely on its pleadings, even if verified, but must adduce competent, admissible evidence.” (Roberts v. Los Angeles County Bar Assn. (2003) 105 Cal.App.4th 604, 613-614 (Roberts).) We “accept[] all admissible evidence [from plaintiff] as true and indulge[] in every reasonable inference to be drawn from that evidence.” (Nagel v. Twin Laboratories, Inc. (2003) 109 Cal.App.4th 39, 52; see also HMS Capital, Inc. v. Lawyers Title Co. (2004) 118 Cal.App.4th 204, 212.) We do not “weigh the credibility or comparative probative strength of competing evidence.” (Wilson v. Parker, Covert & Chidester (2002) 28 Cal.4th 811, 821 (Wilson).)

Favorable Termination of Suit

For Traiger to prevail on his malicious prosecution claim, he had to show the underlying action was resolved in his favor and Bicer prosecuted the action without probable cause and with malice. (Zamos v. Stroud (2004) 32 Cal.4th 958, 965, 973 (Zamos).) Bicer concedes he initiated the underlying action and its termination was favorable to Traiger, who obtained summary judgment after the court granted summary adjudication of the negligence and breach of contract causes of action for lack of evidence creating a triable issue of fact. (See, e.g., Casa Herrera, Inc. v. Beydoun (2004) 32 Cal.4th 336, 342 [“termination is favorable for malicious prosecution purposes where the court in the underlying action: . . . granted summary judgment because there was insufficient evidence to establish a triable issue of fact”].)

Lack of Probable Cause

We turn to the probable cause element. The issue presents a separate and distinct inquiry from favorable termination. (Roberts v. Sentry Life Insurance (1999) 76 Cal.App.4th 375, 382 [“Favorable termination of the suit often establishes lack of merit, yet the plaintiff in a malicious prosecution action must separately show lack of probable cause”] (Roberts).) Traiger notes he obtained summary adjudication of the breach of contract action on the ground that Bicer had no evidence either that Traiger was a party to the investment agreement or that Taggart was his alter-ego.[6] He contends the summary adjudication is unequivocally dispositive of lack of probable cause. As is clear from the cited language of Roberts, ante, Traiger misapprehends the law. Our Supreme Court articulates the rule more expansively, stating that a “defense summary judgment on the underlying claim does not establish lack of probable cause as a matter of law. . . . [T]here is probable cause if, at the time the claim was filed, ‘any reasonable attorney would have thought the claim tenable.’ [Citation.] Plainly, a claim that appears ‘arguably correct’ or ‘tenable’ when filed with the court may nevertheless fail . . . for reasons having to do with the sufficiency of the evidence actually adduced as the litigation unfolds. [E]very case litigated to a conclusion has a losing party, but that does not mean the losing position was not arguably meritorious when it was pled. [Citation.] And just as an action that ultimately proves nonmeritorious may have been brought with probable cause, successfully defending a lawsuit does not establish that the suit was brought without probable cause.” (Jarrow Formulas, supra, 31 Cal.4th at pp. 742-743, fn. omitted, italics added.)

In a malicious prosecution action, the existence or nonexistence of probable cause presents a legal question to be resolved by the court. (Wilson v. Parker, Covert & Chidester (2002) 28 Cal.4th 811, 817 (Wilson).) “[T]he probable cause element calls on the trial court to make an objective determination of the ‘reasonableness’ of the defendant’s conduct, i.e., to determine whether, on the basis of the facts known to the defendant, the institution of the prior action was legally tenable. The resolution of that question of law calls for the application of an objective standard to the facts on which the defendant acted.” (Sheldon Appel, supra, 47 Cal.3d at p. 878, italics added.)

The trial court determined Traiger had not carried his burden of showing that no reasonable person, knowing what Bicer knew, would have filed the underlying breach of contract claim. In our independent review of the record (Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1055), we conclude the court was correct: Traiger never established Bicer knew facts that would have made it objectively unreasonable for him to assert his breach of contract alter-ego theory.

As germane to this issue, the only evidence Traiger offered in opposition to the anti-SLAPP motion were the declarations and documents he had used to obtain summary adjudication of the underlying claims. Traiger’s and his wife’s declarations were of an exculpatory nature, outlining at great length, inter alia: the Traigers’ long-time, close personal relationship with Bicer and his family; the conversations leading up to the point where Traiger had no choice but to give in to Bicer’s incessant begging that Bicer be allowed to put his $50,000 in the high yield trading program, notwithstanding the risks; the Traigers’ respective roles in the transaction and their own complete ignorance that anyone was being scammed; their nonparticipation in any wrongdoing, their own victimization by the scammers; and Taggart’s circumspect compliance with corporations law.

But none of this evidence or any other submitted by the Traigers addressed the issue of whether Bicer actually knew facts that would have alerted any reasonable person that Taggart was not the alter-ego of Traiger, and that the two were entirely separate entities. In this respect, the declarations are far more notable for what they do not say than for what they do say, and the omissions spell defeat for Traiger.

The oft-cited general rule for application of the alter-ego doctrine is stated in Associated Vendors, Inc. v. Oakland Meat Co. (1962) 210 Cal.App.2d 825, 837 (Associated Vendors): “‘”Before a corporation’s acts and obligations can be legally recognized as those of a particular person, and vice versa, it must be made to appear that the corporation is not only influenced and governed by that person, but that there is such a unity of interest and ownership that the individuality, or separateness, of such person and corporation has ceased, and that the facts are such that an adherence to the fiction of the separate existence of the corporation would, under the particular circumstances, sanction a fraud or promote injustice.”’” Associated Vendors lists more than two dozen factors pertinent to the court’s determination of alter-ego (id. at pp. 838-840), but we focus only on those raised by Traiger in his lack-of-probable-cause argument, to wit, when Bicer filed his breach of contract alter-ego claim, he had no evidence that: (1) Taggart was undercapitalized at any relevant time; (2) Traiger was the legal or equitable owner of the corporation; (3) Traiger formed the corporation “for the purpose of entering into the receipt [of funds]”; (4) Taggart failed to comply with corporate formalities, issue stock, or prepare and maintain corporate records; (5) Taggart was used as a mere conduit for Traiger’s affairs; (6) Traiger treated the assets of Taggart as his own or used Taggart’s funds for personal purposes; (7) Traiger’s assets were commingled with Taggart’s; (8) Traiger diverted assets from Taggart to the detriment of creditors; and (9) Traiger held himself out as responsible for the debts of Taggart. But the issue is not whether Bicer had evidence to prove any of those factors: That was the issue in the summary judgment proceedings. The issue in the anti-SLAPP motion was whether Traiger showed that when Bicer filed the alter-ego theory of recovery, he knew, for instance, that Taggart was not undercapitalized, that Traiger was not the legal or equitable owner of Taggart, that Taggart had in fact complied with all relevant formalities, issued stock, and kept proper corporate records, etc., etc., etc.

We need not belabor the point: Bicer’s ability to produce evidence of alter-ego was not at issue in the anti-SLAPP motion. It was Traiger’s burden to prove Bicer knew facts as to the nonviability of an alter-ego claim that would have caused the reasonable person to desist from filing the action. Traiger presented no such proof.

The declarations did not state facts known to Bicer, i.e., neither declarant attested that Bicer was told or obtained through any means actual knowledge of the facts indicating separate identities of Traiger and Taggart such as to deprive him of probable cause to assert his alter-ego theory. The court did not err in its determination of the probable cause issue.[7]

Malice

With regard to Bicer’s negligence claim, Traiger asserts lack of probable cause because all reasonable attorneys would agree the claim lacked merit.[8] (See Jarrow Formulas, supra, 31 Cal.4th at p. 743, fn. 13.) We need not parse the argument or decide the point because Traiger failed to make the requisite showing of malice to support his challenge to any of Bicer’s claims or theories. Our conclusion constitutes a separate and independent ground for affirmance of the order granting Bicer’s anti-SLAPP motion.

As noted in Downey Venture v. LMI Ins. Co. (1998) 66 Cal.App.4th 478, 494, “The ‘malice’ element . . . relates to the subjective intent or purpose with which the defendant acted in initiating the prior action. [Citation.] The motive of the defendant must have been something other than that of . . . the satisfaction in a civil action of some personal or financial purpose. [Citation.] The plaintiff must plead and prove actual ill will or some improper ulterior motive.” The only malice evidence Traiger offered was that Bicer used the word “vengeance” in describing the zeal with which he intended to pursue recovery of his $50,000. The phrase “with a vengeance” is defined as “with great force or vehemence.” (Merriam-Webster’s Collegiate Dictionary Dict. (10th ed. 1999) p. 1310, col. 2.) We decline to interpret Bicer’s use of the phrase as indicating actual ill will or an improper ulterior motive in suing to recoup his not insignificant financial loss.

Traiger urges us to infer malice from lack of probable cause for pleading negligence. However, “[m]erely because the prior action lacked legal tenability, as measured objectively . . . without more, would not logically or reasonably permit the inference that such lack of probable cause was accompanied by the actor’s subjective malicious state of mind.” (Downey Venture v. LMI Ins. Co., supra, 66 Cal.App.4th 478, 498, cited with approval in Jarrow Formulas, supra, 31 Cal.4th at p. 743.)

DISPOSITION

The order granting the anti-SLAPP motion to strike is affirmed. Bicer shall recover his costs on appeal.

IKOLA, J.

WE CONCUR:

BEDSWORTH, ACTING P. J.

MOORE, J.

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[1] All further statutory references are to the Code of Civil Procedure unless otherwise stated. “SLAPP is an acronym for ‘strategic lawsuits against public participation.’ [Citation.] A special motion to strike a SLAPP action, codified in . . . section 425.16, provides a procedural remedy to gain an early dismissal of a lawsuit or a cause of action that qualifies as a SLAPP.” (Slaney v. Ranger Ins. Co. (2004) 115 Cal.App.4th 306, 309, fn. 1.)

[2] Bicer obtained judgment by default against Ryan in the amount of $245,683.09.

[3] In May 2004, Taggart, (of which Traiger’s former wife -- with whom he apparently still lives -- is the sole incorporator and shareholder), filed a chapter 7 bankruptcy petition, resulting in an automatic stay of Bicer’s claim.

[4] Soroy’s motion to join in Bicer’s anti-SLAPP motion was denied. There is no issue on appeal pertaining to Soroy.

[5] The tentative ruling provides insight into the court’s analysis. Inter alia, it states, “Evidence must be admissible at trial in order for Responding Party to meet its burden in a . . . § 425.16 motion (Tuchscher v. San Diego [2003] 106 Cal.App.4th 1219). [Traiger’s] new declarations . . . certainly do not show a lack of probable cause which remains the critical issue in this case pursuant to Slaney v. Ranger (2004) 115 Cal.App.4th 306. A defense summary judgment does not establish a lack of probable cause for the underlying action. Losing a summary judgment motion but still having probable cause to file suit are entirely different standards. Jarrow v. La Marche (2003) 31 Cal.App.4th 728. The bottom line here is that [Traiger] cannot meet its burden to show likelihood of prevailing in this case simply because they won a summary judgment motion. There was sufficient probable cause to sue.”

[6] In this section, we deal only with the alter-ego theory of contract liability. Bicer also sued Traiger for breach of contract based on his alleged individual promises, but in the next section, we conclude Traiger failed to establish the element of malice as to Bicer’s prosecution of all claims at issue. That failure constitutes a separate and independent ground for affirmance of the order granting Bicer’s anti-SLAPP motion.

[7] We briefly digress to observe that malicious prosecution actions have long been disfavored (Sheldon Appel, supra, 47 Cal.3d at p. 872), and the anti-SLAPP statute makes them even more so. Section 425.16 essentially requires parties to have admissible evidence supporting their claim before they file the malicious prosecution suit because they may need to present that evidence in opposition to an anti-SLAPP motion before they conduct discovery. And because lack of probable cause is an element of malicious prosecution, parties need to have admissible evidence, without the benefit of discovery, showing the other side actually knew the underlying action was legally untenable. We wonder how often this kind of evidence is readily available. Thus, parties must weigh carefully the availability of this kind of evidence against the amount of damages incurred in defending the underlying action. Sometimes, this calculation will weigh in favor of asserting a malicious prosecution claim. More frequently, we imagine, it will not. When the underlying action has been defeated quickly and relatively inexpensively, one might ask whether a malicious prosecution action is worth the risk of losing to an anti-SLAPP motion and paying attorney fees and costs to the moving party. (§ 425.16, subd. (c).)

[8] Quoting Erlich v. Menezes (1999) 21 Cal.4th 543, 551, Traiger asserts that “conduct amounting to a breach of contract becomes tortious only when it also violates a duty independent of the contract arising from principles of tort law.”