HUTTON v. HAFIF

Filed 5/3/07

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FIVE

APPEAL from an order of the Superior Court of Los Angeles County, Paul Gutman, Judge. Affirmed in part; reversed in part.

Cheong, Denove, Rowell & Bennett, John F. Denove, and John D. Rowell for Plaintiff and Appellant.

Law Offices of James J. Moneer, James J. Moneer for Defendants and Respondents.

I. Introduction

In this malicious prosecution lawsuit,plaintiff, Terrie Hutton, appeals from two orders. To begin with, Ms. Huttonappeals from a July 13, 2005 judgment entered by Judge Paul Gutman awarding attorney fees pursuant to Code of Civil Procedure^[1]section 425.16, subdivision (c) to defendants, the Law Offices of Herbert Hafif and Herbert Hafif. Further, Ms. Huttonappeals from an October 25, 2005 order by Judge Paul Gutman where he ruled he was bound by the law of the case doctrine and our prior unpublished opinion which held the special motion to strike in the present lawsuitmust be granted.

This case involves the third lawsuit between the parties arising from representation provided by Mr. Hafif and his firm of Ms. Hutton in a discrimination lawsuit between 1991 and 1993. Dissatisfied with her recovery, Ms. Huttonfiled the first action between the parties, a malpractice suit, against Mr. Hafif and his firm which was ultimately dismissed (a dismissal which was set aside on appeal). Mr. Hafif and his firm then sued Ms. Huttonalong with others and this second lawsuit between the parties was ultimately dismissed pursuant to section 425.16. Ms. Huttonthen filed this third lawsuit between the parties for malicious prosecution. The present lawsuit alleges Mr. Hafif and his firm maliciously filed and prosecuted the second action filed by them against Ms. Hutton and others. The special motion to strike of Mr. Hafif and his firm was denied. We ultimately held the special motion to strike must be granted and remanded for an award of attorney fees. Judge Gutman issued an attorney fees award in favor of Mr. Hafif and his firm. Then, after Judge Gutman had entered the attorney fees award, the Legislature enacted section 425.18 which applies to what the Legislature has termed a SLAPPback action and amended section 425.16, subdivision (b)(3) which is part of the special motion to strike statute. Judge Gutman refused to set aside the attorney fees order. While this appeal was pending, our Supreme Court issued its opinion in Soukup v. Law Office of Herbert Hafif (2006) 39 Cal.4th 260, 278-297 which defines the contours of a special motion to strike filed in a SLAPPback action.

In this complex procedural and legal context, the parties raise three contentions. First, we agree with Ms. Huttonthat the attorney fees award must be reversed. This lawsuit meets the statutory definition of a SLAPPback action in section 425.18, subdivision (b)(1). Attorney fees are not recoverable by a defendant who successfully files a special motion to strike in a SLAPPback action. Second, we disagree with Ms. Hutton that a special motion to strike could not even be filed because the conduct in the second lawsuit that gave rise to the present malicious prosecution action was illegal as a matter of law within the meaning of section 425.18, subdivision (h). Third, we disagree with Ms. Hutton that the amendment to section 425.16, subdivision (b)(3) requires us to reverse the order granting the special motion to strike. The bottom line is we reverse the attorney fees order but otherwise affirm the order granting the special motion to strike and cost award.

II. Background

A. The First Action

In 1991, Mr. Hafif and his firm began representing Ms. Huttonin a discrimination action filed against GTE, which settled in 1992. Thereafter, Ms.Hutton and Mr. Hafif and his firm became involved in a dispute about approximately $60,000 in costs. Between June 1993 and February 1994, a number of former clients of Mr. Hafif and his firm, including Ms. Hutton, filed a series of State Bar complaints and lawsuits against Mr. Hafif and his firm.

In June 1993, Ms. Hutton, who was represented by a lawyer named Sasson Sales, filed suit in Los Angeles Superior Court seeking in part the recovery of costs that Mr. Hafif and his firm kept from the GTE settlement. (Terrie M. Hutton v. Law Offices of Herbert Hafif (Super. Ct. Los Angeles County, 1993, No. BC084002).) This is the first lawsuit between Ms. Hutton and Mr. Hafif and his firm. Ms. Huttons legal malpractice action against Mr. Hafif and his firm was dismissed after a demurrer to her second amended complaint was sustained without leave to amend. In addition to dismissing the first lawsuit, Retired Los Angeles Superior Court Judge Melvin Grover imposed $25,000 in sanctions pursuant to section 128.5 against Ms. Huttonand her attorney, Mr. Sales, for filing a frivolous lawsuit in bad faith. The sanctions order was entered on October 7, 1994. The judgment of dismissal and the sanctions order were reversed on appeal by Division Two of this appellate district which found Ms. Huttonssecond amended complaint stated a fiduciary duty breach cause of action. (Hutton v. Hafif (Aug. 20, 1997, B088405) [nonpub. opn.].)

B. The Second Action

On May 6, 1994, Mr. Hafif and his firm filed an action against Ms. Hutton and seven others in Orange County Superior Court. (Law Offices of Herbert Hafif v. Killingsworth (Super. Ct. Orange County, 1996, No. 729347).) This is the second lawsuit between the parties. For purposes of clarity, we will refer to this second lawsuit between the parties as the Killingsworth action. The various complaints alleged Ms. Hutton and others had conspired to coerce financial concessions from Mr. Hafif and his firm. The conspiracy involved filing frivolous legal malpractice lawsuits against Mr. Hafif and his firm and disseminating false information about them. The original Killingsworth complaint asserted causes of action against Ms. Huttonand others for fraud, criminal profiteering, tortious interference with business relations, slander and libel, and privacy invasion. In the second amended Killingsworth complaint, filed on October 13, 1994, Mr. Hafif and his firm alleged causes of action for malicious prosecution, defamation, and tortious interference with business relations. The second amended Killingsworth complaint alleged that Ms. Huttonhad filed a legal malpractice action against Mr. Hafif and his firm. This was the first lawsuit between Ms. Hutton and Mr. Hafif and his firm. Retired Judge Grover found the operative complaint in the first lawsuit was frivolous (a ruling later reversed on appeal). The second amended Killingsworth complaint also alleged that Ms. Hutton and her coconspirators publicized and re-publicized the content of confidential communications which had been made against Mr. Hafif and his firm to the State Bar. These disclosures were accomplished with the intent to compel Mr. Hafif and his firm to abandon their claims for fees and costs. Retired Orange County Superior Court Judge Leonard Goldstein denied a summary judgment motion in the Killingsworth action brought by Ms. Huttonon the ground triable issues of material fact existed as to whether a conspiracy actually existed. In support of his order denying Ms. Huttonssummary judgment motion, Retired Judge Goldstein relied upon diaries kept by her outlining the actions taken by her and the alleged coconspirators.

On December 9, 1996, Retired Orange County Superior Court Judge Robert E. Thomas granted Ms. Huttons special motion to strike the second amended complaint in the Killingsworth action pursuant to section 425.16. Division Three of the Court of Appeal for the Fourth Appellate District affirmed Retired Judge Thomass order granting the special motion to strike the second amended complaint in the Killingsworth action. (Law Offices of Herbert Hafif v. Soukup (April 27, 2000, G020977) [nonpub. opn.].) The Court of Appeal opinion held that the claims of Mr. Hafif and his firm against Ms. Hutton in the Killingsworth action were predicated upon allegations that she made complaints to the State Bar and newspaper articles repeating the allegations. The Court of Appeal held: Huttons allegedly actionable conduct consisted of her making complaints to the State Bar. Such statements clearly fall within the action protected by [section 425.16]. (Id. [at p. 5].) The Court of Appeal further stated: The only evidence potentially showing merit in Hafifs claims came from Huttons diaries, which were prepared for transmission to her lawyer. The trial court properly concluded they were inadmissible. (Id. [at p. 6].)

C. The Third Action

On November 30, 2000, Ms. Huttonfiled the present lawsuit in which she alleged Mr. Hafif and his firm maliciously prosecuted the Killingsworth action against her. On July 20, 2001, Mr. Hafif and his firm filed a special motion to strike the present malicious prosecution action. Mr. Hafif and his firm argued: they had probable cause to file the Killingsworth action because the totality of facts demonstrated Ms. Huttonwas a participant in a conspiracy to file a malicious and defamatory action against them; Retired Judge Goldstein relied on Ms. Huttons diaries to deny a summary judgment motion directed at her second amended complaint in the Killingworth action; they had probable cause to believe the diaries were admissible; and the Court of Appeal for the Fourth Appellate Districtfound the diaries provided potential, albeit inadmissible, evidence of a conspiracy. On June 27, 2002, Retired Judge Alban I. Niles denied the special motion to strike on the ground Mr. Hafif and his firm did not have probable cause to file the Killingsworth action. Mr. Hafif and his firm appealed from Retired Judge Niless order denying the special motion to strike.

On May 11, 2004,we reversed Retired Judge Niless order denying the special motion to strike filed by Mr. Hafif and his firm. We concluded Retired Judge Goldsteins denial of Ms. Huttons summary judgment motion in the Killingsworth action established probable cause under Wilson v. Parker, Covert & Chidester (2002) 28 Cal.4th 811, 816-826. We remanded the case and directed Retired Judge Niles to enter a new order granting the special motion to strike. (Hutton v. Hafif (May 11, 2004, B162572) [nonpub. opn.].) The Supreme Court denied review on February 16, 2005.

On May 26, 2005, Judge Gutman entered an order granting the special motion to strike and a judgment of dismissal. On May 10, 2005, Judge Gutman granted thesection 425.16, subdivision (c) attorney fees motion filed by Mr. Hafif and his firm. On July 13, 2005, Judge Gutman entered a judgment awarding Mr. Hafif and his firm $166,388.19 in attorney fees and $4,195.69 in costs. Ms. Huttonfiled a notice of appeal from the May 26 and July 13, 2005 judgments on September 19, 2005.

On October 7, 2005, Ms. Huttonfiled a motion for relief from the judgment and attorney feesorders because on October 5, 2005, Governor Arnold Schwartzenegger signed Assembly Bill No. 1158 (2005-2006 Reg. Sess.) which amended section 425.16, subdivision (b)(3) and enacted section 425.18 as urgency legislation. Ms. Huttonrequested Judge Gutman reconsider hisorder granting the special motion to strike and awarding attorneys fees. Ms. Hutton further requested that Judge Gutman grant her relief under section 473 from his prior orders due to material changes in the law. On October 25, 2005, Judge Gutman denied the motions for relief from the judgment and his priororders ruling: In its essence, this courts order granting defendants special motion to strike and this courts order and judgment of dismissal entered on May 26, 2005 was based entirely upon the 2004 reversal of Judge Niles by the Court of Appeal, Second District. As such, plaintiffs motion is improper and untimely inasmuch as it challenges the decision of the Court of Appeal. The relief sought by plaintiff is improperly laid at the feet of this court, whereas any such request for relief should be addressed to the Court of Appeal. []  That plaintiff contends that the judgment granting attorneys fees and costs is improper in light of new laws, such does not constitute attorneys mistake, inadvertence, surprise or excusable neglect. This courts judgment granting the Hafif defendants attorneys fees and costs was not the result of plaintiffs counsels error or anyone elses mistake, inadvertence, surprise or neglect, excusable or otherwise. On November 23, 2005, Ms. Hutton filed a notice of appeal from the October 25, 2005 order. We consolidated the appeals resulting from the filing of the September 19 and the November 23, 2005 notices of appeal.

III. Discussion

A. Standard of Review and Burdens of Proof

A special motion to strike may be filed in response to a meritless suit filed primarily to chill the defendant's exercise of First Amendment rights. (Dove Audio, Inc. v. Rosenfeld, Meyer & Susman (1996) 47 Cal.App.4th 777, 783, quoting Wilcox v. Superior Court (1994) 27 Cal.App.4th 809, 815, fn. 2, disapproved on another point in Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 68, fn. 5.) Under section 425.16, any cause of action against a person arising from any act . . . in furtherance of the . . . right of petition or free speech . . . in connection with a public issue must be stricken unless the courts finds a probability that the plaintiff will prevail on whatever claim is involved. ( 425.16, subd. (b)(1); Dowling v. Zimmerman (2001) 85 Cal.App.4th 1400, 1415; Dove Audio, Inc. v. Rosenfeld, Meyer & Susman, supra, 47 Cal.App.4th at p. 783.) There is no requirement though that the suit be brought with the specific intent to chill the defendant's exercise of free speech or petition rights. (Jarrow Formula, Inc. v. LaMarche (2003) 31 Cal.4th 728, 734; Navellier v. Sletten (2002) 29 Cal.4th 82, 88; Equilon Enterprises v. Consumer Cause, Inc., supra, 29 Cal.4th at pp. 58-67.) In order to protect the constitutional rights of petition and free speech, we broadly construe this statute. ( 425.16, subd. (a); Kibler v. NothernInyoCounty Local Hosp. Dist. (2006) 39 Cal.4th 192, 199; Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th 1106, 1119-1121.)

When a special motion to strike is filed, the trial court must consider two components. First, the moving party has the initial burden of establishing a prima facie case that the plaintiff's cause of action arose out of the defendants actions in the furtherance of the rights of petition or free speech. ( 425.16, subd. (b)(1); Flatley v. Mauro (2006)39 Cal.4th 299, 314; Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1056.) Second, once the defendant establishes the challenged cause of action claims arise out of the exercise of petition or free expression rights, the burden shifts to the plaintiff. The plaintiff must then establish a probability that he or she will prevail on the merits. ( 425.16, subd. (b)(1); Flatley v. Mauro, supra, 39 Cal.4th at p. 314; Rusheen v. Cohen, supra, 37 Cal.4th at p. 1056.) The Supreme Court has defined the probability of prevailing burden as follows, [T]he plaintiff must demonstrate that the complaint is both legally sufficient and supported by a sufficient prima facie showing of the facts to sustain a favorable judgment if the evidence submitted by plaintiff is credited. (Wilson v. Parker, Covert & Chidester [supra,] 28 Cal.4th [at p.] 821, quoting Matson v. Dvorak (1995) 40 Cal.App.4th 539, 548.) (Navellier v. Sletten, supra, 29 Cal.4th at pp. 88-89; Briggs v. Eden Council for Hope & Opportunity, supra, 19 Cal.4th at p. 1123.) We will detail later the special burdens of proof imposed on a plaintiff in a SLAPPback action when a special motion to strike is filed. In reviewing an order granting a special motion to strike, we use our independent judgment to determine whether the defendant was engaged in a protected activity and the plaintiff has sustained his or her burden of prevailing on the challenged cause of action. (Flatley v. Mauro, supra, 39 Cal.4th at pp. 325-326; Rushen v. Cohen, supra, 37 Cal.4th at p. 1055.)

B. The Attorney Fee Award

Ms. Hutton argues that the attorney fee award must be reversed. She relies onsection 425.18 which provides in part: (b) For purposes of this section, the following terms have the following meanings: []  (1) SLAPPback means any cause of action for malicious prosecution or abuse of process arising from the filing or maintenance of a prior cause of action that has been dismissed pursuant to a special motion to strike under Section 425.16. []  (2) Special motion to strike means a motion made pursuant to Section 425.16. []  (c) The provisions of subdivisions (c), (f), (g), and (i) of Section 425.16, and paragraph (13) of subdivision (a) of Section 904.1, shall not apply to a special motion to strike a SLAPPback. . . . []  (h) A special motion to strike may not be filed against a SLAPPback by a party whose filing or maintenance of the prior cause of action from which the SLAPPback arises was illegal as a matter of law.

After Ms. Hutton filed her opening brief on appeal, the California Supreme Court issued its opinion in Soukup v. Law Offices of Herbert Hafif, supra, 39 Cal.4th at pages 278-297. Soukup involved a malicious prosecution action against defendants in the current action, which was brought by one of plaintiffs alleged co-conspirators in the Killingsworth action, Peggy J. Soukup. (Id. at pp. 269-275.) (One of the defendants in Ms. Soukups lawsuit is not named in the present action.) In Soukup,the trial court denied the defendants special motions to strike her malicious prosecution complaint. (Soukup v. Law Offices of Herbert Hafif, supra, 39 Cal.4th at pp. 275-276.) The Soukup case was assigned to this division of the Second Appellate District. We initially affirmed the order denying the special motions to strike. (Soukup v. Law Offices of Herbert Hafif (Aug. 16, 2002, B152759) [nonpub. opn.].) But upon grant of review and remand, and after carefully revaluating the matter, we reversed our earlier ruling. (Soukup v. Law Offices of Herbert Hafif (June 30, 2004, B152759) [nonpub. opn.].) We held the special motions to strike should have been granted. (Soukup v. Law Offices of Herbert Hafif, supra, 39 Cal.4th at pp. 277-278.) Our Supreme Court granted Ms. Soukups review petition. While the case was pending before our Supreme Court, the Legislature enacted and Governor Schwartzenegger signed as urgency legislation section 425.18. Ultimately, the Supreme Court reversed our judgment and ordered that the defendants special motions to strike be denied. (Id. at pp. 278, 297.)

In Soukup, our Supreme Court stated: [T]he Legislature amended the anti-SLAPP statute to add section 425.18, which defines any cause of action for malicious prosecution or abuse of process arising from the filing or maintenance of a prior cause of action that has been dismissed pursuant to a special motion to strike under Section 425.16 as a SLAPPback. ( 425.18, sub. (b)(1).) The Legislature declared that SLAPPbacks should be treated differently . . . from an ordinary malicious prosecution action because a SLAPPback is consistent with the Legislatures intent to protect the valid exercise of the constitutional rights of free speech and petition by its deterrent effect on SLAPP . . . litigation and by its restoration of public confidence in participatory democracy. ( 425.18, subd. (a).) Section 425.18 exempts SLAPPbacks from certain procedures otherwise applicable to motions to strike under the anti-SLAPP statute and sets forth special procedures that apply only to SLAPPbacks. Additionally, subdivision (h) of the new section precludes the use of the anti-SLAPP statute to dismiss SLAPPbacks by a party whose filing or maintenance of the prior cause of action from which the SLAPPback arises was illegal as a matter of law. ( 425.18, subd. (h).) (Soukup v. Law Offices of Herbert Hafif, supra, 39 Cal.4th at p. 268.)

The parties acknowledge that section 425.18 applies to cases such as this which were filed prior to its enactment and are pending on appeal. Soukup squarely so states. (Soukup v. Law Offices of Herbert Hafif, supra, 39 Cal.4th at pp. 280-281.) Plaintiffs malicious prosecution claim was based on the filing and maintenance of the Killingsworth action by Mr. Hafif and his firmthat was dismissed pursuant to section 425.16. Thus, the present malicious prosecution lawsuit is within the statutory definition of a SLAPPback action. ( 425.18, subd. (b)(1).)

Mr. Hafif and his firm present the following arguments as to why section 425.18 should not apply to this lawsuit: the current lawsuit is a run-of-the-mill malicious prosecution action which entitled them to bring their special motion to strike under the standard section 425.16 provisions; under Flatley v. Mauro, supra, 39 Cal.4th at pages 305, 313-318, Ms. Huttonhas unclean hands in that she attempted to extort money from them so that she should not have prevailed in her motion to strike in the Killingsworth action; and Flatley abrogated the legal basis for Ms. Huttons special motion to strike the Killingsworth action. We respectfully disagree. Ms. Huttons malicious prosecution claim in this lawsuit is clearly and unequivocally a SLAPPback action as it is defined by section 425.18, subdivision (b)(1). In any event, the section 425.16 dismissal of Killingsworth action was affirmed by our Fourth Appellate District colleagues on April 27, 2000. (Law Offices of Herbert Hafif v. Soukup, supra, G020977 [at p. 8].) Defendants have not cited any authority which would allow us to relitigate the merits of the Fourth Appellate Districts now final April 27, 2000 opinion affirming the order granting Ms. Huttonsspecial motion to strike in the Killingsworth action. This case is a SLAPPback action subject to section 425.18.

As noted, section 425.18 treats the right to attorney fees differently when a defendants special motion to strike a malicious prosecution claim is granted in a SLAPPback action. Section 425.16, subdivision (c), the mandatory attorney fee provision in special motion to strike litigation, is inapplicable in a SLAPPback action. Section 425.18, subdivision (c) states in part, The provisions of subdivision[ ] (c) . . . of Section 425.16 shall not apply to a special motion to strike a SLAPPback. (See Soukup v. Law Offices of Herbert Hafif, supra, 39 Cal.4th at p. 282.) The attorney fee provision applicable to SLAPPback actions states, If the court finds that a special motion to strike a SLAPPback is frivolous or solely intended to cause unnecessary delay, the court shall award costs and reasonable attorneys fees to a plaintiff prevailing on the motion, pursuant to Section 128.5. ( 425.18, subd. (f).) The Supreme Court explained that the effect of section 425.18, subdivision (f) is to treat a plaintiff in a SLAPPback action more favorably than in ordinary special motion to strike litigation: The import of these provisions is to stack the procedural deck in favor of the SLAPPback plaintiff confronted with a special motion to strike. They do so by providing the plaintiff with both a longer timeframe, and the means with which, to conduct discovery that might yield evidence to resist the motion to strike, exempting the plaintiff from fees and costs even if the plaintiffs SLAPPback action is stricken . . . . (Soukup v. Hafif, supra, 39 Cal.4th at p. 282, italics added.) Thus, in a SLAPPback action, section 425.16, subdivision (c) fees may not be imposed against a plaintiff when the special motion to strike is granted. Because section 425.18, subdivisions (c) and (f) apply to this case, Ms. Hutton is correct--the order awarding Mr. Hafif and his firm attorney fees pursuant to section 425.16, subdivision (c) must be reversed.

C. Nothing In Section 425.18 Requires The Order Granting The Special Motion To Strike Be Reversed.

Ms. Huttonargues the order granting the special motion to strike must be reversed. No doubt, as noted, section 425.18 applies to cases pending on appeal. (Soukup v. Law Offices of Herbert Hafif, supra, 39 Cal.4th at p. 280-281.) But this case is different from Soukup in a material respect. In this case, in our 2004 unpublished opinion, we reversed the order denying the special motion to strike. In compliance with our decision, Judge Gutman granted the special motion to strike. A sound argument can be made that because we had previously decided the special motion to strike must be granted and Ms. Huttons review petition was denied, principles of res judicata and the law of the case doctrine prevent her from litigating this issue a second time notwithstanding the amendments to section 425.18, subdivision (h). (See Morohoshi v. Pacific Home (2004) 34 Cal.4th 482, 491; People v. Stanley (1995) 10 Cal.4th 764, 786-787.) Our situation is different from that present in Soukup. In Soukup, we ordered that the special motion to strike be granted and the review petition was granted. There was no binding appellate court judgment in Soukup when our Supreme Court held section 425.18 applies to pending appeals and reached the merits of the special motion to strike. We need not address the question of whether section 425.18 can apply on appeal to the merits of a special motion to strike when a prior final appellate court decision ordered it be granted. We assume for purposes of argument that section 425.18 applies to the issue of the merits of the special motion to strike of Mr. Hafif and his firm.

Ms. Hutton argues we must order the special motion to strike filed by Mr. Hafif and his firm be denied because of section 425.18, subdivision (h). Section 425.18, subdivision (h) materially restricts the ability of a defendant named in a malicious prosecution or process abuse claim in a SLAPPback action to file a special motion to strike. As previously noted, section 425.18, subdivision (h) states, A special motion to strike may not be filed against a SLAPPback by a party whose filing or maintenance of the prior cause of action from which the SLAPPback arises was illegal as a matter of law. In Soukup, our Supreme Court explained: An illegal act is an act [f]orbidden by law. (Blacks Law Dict. (7th ed.1999), p. 750.) By specifying that only those defendants whose filing or maintenance of the underlying action was illegal as a matter of law are barred from bringing a special motion to strike a SLAPPback, it is clear that the Legislature intended to require something more than that the underlying action was dismissed as a SLAPP before section 425.18, subdivision (h) applies. (Soukup v. Law Offices of Herbert Hafif, supra, 39 Cal.4th at p. 283.)

Story continues as Part II .

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^[1] Unless otherwise noted, all future statutory references are to the Code of Civil Procedure.