Attig v. Graffam

Filed 6/21/07 Attig v. Graffam CA4/2

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION TWO

APPEAL from the Superior Court of San Bernardino County. Martin A. Hildreth, Judge. (Retired judge of the San Bernardino Municipal Court, assigned by the Chief Justice pursuant to art. VI, 6, of the Cal. Const.) Affirmed with directions.

Arias & Lockwood and Christopher D. Lockwood for Defendants and Appellants.

Wasserman & Miller, Arthur Wasserman and Richard T. Miller for Plaintiff and Respondent.

Introduction

After prevailing in a lawsuit brought against her by Jocer Enterprises, Inc., Laura Attig filed an action for malicious prosecution against Jocer Enterprises and its owners, Spencer Graffam and Jodi Graffam (collectively defendants). Defendants filed a motion under the anti-SLAPP (strategic lawsuit against public participation) statute (Code Civ. Proc., 425.16). The trial court denied the motion and found that Attig established a reasonable probability of prevailing on the merits.

In challenging the trial courts decision, defendants claim that the court erred in finding that Attig provided sufficient evidence to support her allegations against the individual defendants. Defendants also claim that the court erred in finding that Attig presented evidence to establish that defendants acted with malice in initiating and maintaining the underlying action. Defendants specifically argue that the court erroneously relied on its prior decision granting Attigs motion for attorneys fees based on Castlebrooks bad faith as conclusive proof of malice both for purposes of defeating defendants anti-SLAPP motion and for purposes of trial. Defendants also object to the trial courts award of attorneys fees. For the reasons discussed below, we affirm the trial courts ruling denying defendants anti-SLAPP motion, but reverse the ruling awarding Attig attorneys fees.

Facts and Procedural History^[1]

Attig worked for Jocer Enterprises, Inc., which was doing business as Castlebrook Barns, from July to November 2002. Attig was fired for allegedly stealing information concerning Castlebrooks customers and giving leads to her boyfriend, Thomas Hayes, who was in the business of building equestrian fences and pipe corrals.

On November 26, 2002, Castlebrook filed its complaint against Attig for various causes of action, including breach of contract and misappropriation of trade secrets. Castlebrook also filed and was granted a temporary restraining order (TRO). The court later vacated the TRO and denied Castlebrooks motion for a preliminary injunction. Although Castlebrook alleged in its complaint that it lost hundreds of thousands of dollars in gross sales because Attig was giving leads to Hayes, the evidence in the record showed that Hayes did not perform any work based on the leads. Attig moved for nonsuit and the trial court granted the motion. The court entered judgment for Attig and awarded her attorneys fees. This court affirmed the trial courts ruling. (Jocer Enterprises, Inc. v. Attig (Nov. 10, 2005, E036701) [nonpub. opn.].)

On September 22, 2004, Attig filed her complaint against Castlebrook and the Graffams for abuse of process. Castlebrook and the Graffams filed a special motion to strike under the anti-SLAPP statute. The trial court granted the motion and awarded attorneys fees. This court again affirmed the trial courts ruling. (Attig v. Graffam (May 9, 2005, E038107) [nonpub. opn.].)

On March 3, 2006, Attig filed another complaint based on the same underlying facts, this time for malicious prosecution. Attig alleged that the Graffams were Castlebrooks alter ego based on their sole ownership and commingled assets. Attig alleged that defendants prosecuted their action against her without probable cause and with malice.

Defendants again responded with a special motion to strike under the anti-SLAPP statute. They argued that Attig failed to demonstrate its initial action was prosecuted without probable cause. They also argued that there was no evidence of malice. The trial court denied the motion and awarded Attig attorneys fees, as requested.

Discussion

Defendants challenge the trial courts rulings on the anti-SLAPP motion and Attigs request for attorneys fees. Defendants specifically argue that Attig failed to establish the element of malice as to both the individual and corporate defendants. Defendants also argue that the trial court erred in assuming that its decision dispensed with the issue of liability for Attigs malicious prosecution claim. In challenging the courts award of attorneys fees, defendants argue that the court applied the wrong standard in determining whether the motion was frivolous.

1. Anti-SLAPP Motion

We begin our discussion with the rules governing our review of the trial courts ruling on a motion under Code of Civil Procedure section 425.16. The anti-SLAPP statute authorizes the trial court to strike a cause of action against a person arising from that persons exercise of the constitutional rights to free speech and petition for redress of grievances. (Code Civ. Proc., 425.16; see Flatley v. Mauro (2006) 39 Cal.4th 299, 311-312.) The Legislature enacted the statute to discourage lawsuits brought primarily to chill the valid exercise of these constitutional rights. (Flatley, supra, at p. 312.) The anti-SLAPP motion provides a summary-judgment-like procedure to screen out meritless claims. (Ibid.)

Under Code of Civil Procedure section 425.16, the moving party, usually the defendant, bears the initial burden of showing that the cause of action arose from his act in furtherance of his right to petition. (Code Civ. Proc., 425.16, subd. (b)(1); see Zamos v. Stroud (2004) 32 Cal.4th 958, 965.) If the defendant makes this showing, the burden shifts to the plaintiff to establish that there is a probability of prevailing on the merits of his claim. (Code Civ. Proc., 425.16, subd. (b)(1); see Zamos, supra, at p. 965.) To satisfy this burden, the plaintiff must demonstrate that the complaint is legally sufficient and the elements of his claim are supported by a sufficient prima facie showing of facts such that, if the evidence submitted in support of these facts is credited, he would be entitled to a favorable judgment. (Zamos, supra, at p. 965.)

A trial courts ruling on an anti-SLAPP motion is reviewed de novo. (Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 269, fn. 3 (Soukup).) As with a motion for summary judgment, the issues in an anti-SLAPP motion are framed by the pleadings. (Paulus v. Bob Lynch Ford, Inc. (2006) 139 Cal.App.4th 659, 672-673.) We independently review the pleadings and the affidavits submitted by the parties and determine whether the plaintiff has made a prima facie showing of facts necessary to establish his claim at trial. (Soukup, supra, at p. 369, fn. 3; Paulus, supra, at p. 673.) The plaintiff may not rely on the complaint alone, but must produce admissible evidence to support the element of his claim. (Paulus, supra, at p. 673.) The role of the trial court is not to weigh the credibility or comparative strength of the parties evidence. (Wilson v. Parker, Covert & Chidester (2002) 28 Cal.4th 811, 821.) The court simply determines whether defendant has shown that his evidence defeats the plaintiffs prima facie showing as a matter of law. (Ibid.; Colt v. Freedom Communications, Inc. (2003) 109 Cal.App.4th 1551, 1557.)

In her complaint, Attig alleged a single cause of action for malicious prosecution. A malicious prosecution claim falls within the purview of the anti-SLAPP statute because, by definition, it is based on an underlying lawsuit, i.e., a petition to the courts for redress of grievances. (Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 734-735; Robinzine v. Vicory (2006) 143 Cal.App.4th 1416, 1421.) Defendants burden is satisfied and, therefore, this case turns on the issue of whether Attig satisfied her burden of making a sufficient prima facie showing of facts to support her claim. To prevail on a malicious prosecution claim, the plaintiff must show that the prior action (1) was commenced by or at the direction of the defendant and was pursued to a legal termination favorable to the plaintiff; (2) was brought without probable cause; and (3) was initiated with malice. [Citation.] (Soukup, supra, 39 Cal.4th at p. 292.) Defendants arguments are directed at the first and third elements.

A. Individual Defendants

As to the first element above, defendants argue that Attig cannot maintain an action against them because they were not parties in the underlying action. Their contention, therefore, is that the prior action was not commenced by them or initiated at their direction. The prior action was brought by the corporate entity, Castlebrook (Jocer Enterprises, Inc.), and not the individual defendants, Spencer Graffam and Jodi Graffam. Defendants specifically argue that, although Attigs complaint included allegations under the alter ego theory, she failed to provide any evidence to support her allegations.

Attig responds that the individual defendants directly were liable for prosecuting the underlying action. Attig is correct that the former plaintiff is not the only person who is subject to liability in a malicious prosecution action.

A malicious prosecution action may be brought against the party who filed the lawsuit or any other person who was actively instrumental in putting the law in motion and causing the case to proceed. (See Cedars-Sinai Medical Center v. Superior Court (1988) 206 Cal.App.3d 414, 417; Jacques Interiors v. Petrak (1987) 188 Cal.App.3d 1363, 1371-1372.) The cases show that, where the plaintiff in the prior action was a corporate entity, individuals who represented the corporation in the action, including its lawyers and officers, also may be proper plaintiffs in a malicious prosecution action. (See, e.g., Slaney v. Ranger Ins. Co. (2004) 115 Cal.App.4th 306, 309-310 [the plaintiffs sued their insurance company and its lawyers, coincidentally, Arthur Wasserman and his firm, for filing a cross-complaint alleging fraud in the underlying action]; Scannell v. County of Riverside (1984) 152 Cal.App.3d 596, 602 [plaintiff brought a malicious prosecution action against the County of Riverside, who filed the criminal charges, the sheriffs detective, the railroad company, and an agent of the company]; Lujan v. Gordon (1977) 70 Cal.App.3d 260, 264 [plaintiff was able to maintain a malicious prosecution action against the attorney and his law firm based on their involvement in the prior action]; Ramsden v. Western Union (1977) 71 Cal.App.3d 873, 877 [plaintiff sued two corporations and the officers and employees of the corporations for making false criminal allegations].)

For the purposes of establishing the first element of the malicious prosecution claim, plaintiff must show that defendants initiated and maintained the prior lawsuit which resulted in a legal termination favorable to Attig. (Soukup, supra, 39 Cal.4th at p. 292.) Defendants do not and cannot dispute that the underlying lawsuit ended in a judgment in favor of Attig. The record is clear. The evidentiary basis for the lawsuit was so inadequate that the trial court granted a nonsuit and this court affirmed that ruling. (Jocer Enterprises, Inc. v. Attig (Nov. 10, 2005, E036701) [nonpub. opn.].)

Although Castlebrook was the only named plaintiff in the prior action, Spencer and Jodi Graffam owned and operated Castlebrook. They initiated and maintained the lawsuit on behalf of their company. Moreover, they provided the factual basis for the underlying lawsuit. A person who provides false allegations, although not a party in the case, nonetheless may be subject to an action for malicious prosecution. (See Ramsden v. Western Union, supra, 71 Cal.App.3d at p. 877.)

In her complaint for malicious prosecution, Attig alleged, without distinguishing among the corporate and individual defendants: Defendants acted without probable cause in instituting, prosecuting and pursuing the underlying case, to and through an appeal. Attig specifically alleged: The individual defendants herein controlled the underlying action, individually or in cooperation with others, and each is bound by the adjudications of litigated matters in the underlying case.

Contrary to defendants argument, the record contains evidence in support of Attigs allegations. In her opposition to the anti-SLAPP motion, Attig provided her own declaration and requested judicial notice of the pleadings and supporting papers in the underlying action. Attig made the following statement in her declaration: When I had been working [at Castlebrook] for about three months, I was suddenly called into Spencer Graffams office where he yelled at me, accused me of an alleged breach of contract, accused me of stealing his trade secrets, threatened to put me into bankruptcy and fired me. Attig also noted that, shortly after her termination, she received the summons and complaint in the underlying action, which contained these and other allegations. According to Attig, Spencer Graffam and Jodi Graffam both were actively involved in the events leading up to the trial and continued to prosecute the case despite the lack of evidence. The materials submitted by defendants in support of their motion also refer to testimony and statements made by defendants concerning Attigs alleged wrongdoing. Although defendants argue that Attig failed to substantiate her alter ego allegations, this evidence shows that Spencer Graffam and Jodi Graffam were personally involved in the prior action. They were actively instrumental in causing the case to be commenced and maintained. (See Cedars-Sinai Medical Center v. Superior Court, supra, 206 Cal.App.3d at p. 417.)

Based on the above evidence, we conclude that Attig satisfied her burden as to the first element.

B. Malice

It appears that the trial court found that Attig established the element of malice based on its earlier finding in ruling on Attigs request for attorneys fees that Castlebrook prosecuted the underlying action in bad faith. In ruling on defendants motion, the court found that defendants were collaterally estopped from arguing that there was no malice.

The malice required for malicious prosecution pertains to the defendants subjective intent or purpose in initiating the prior action. This malice requirement may be established by evidence that the defendant harbored ill will toward the plaintiff or that the defendant pursued the prior action for an improper purpose. (Ross v. Kish (2006) 145 Cal.App.4th 188, 204, citing Swat-Fame, Inc. v. Goldstein (2002) 101 Cal.App.4th 613, 633.) Situations where the action is pursued for an improper purpose include those where a person knows that his claims are without merit or where the person initiates the action solely to deprive the defendant of the beneficial use of his property. (See Downey Venture v. LMI Ins. Co (1998) 66 Cal.App.4th 478, 495.) While the lack of merit or probable cause for a claim alone may be insufficient to prove malice, it is a factor that may be considered in determining the persons intent. (See Ross v. Kish, supra, at p. 204.) But the plaintiff in the malicious prosecution has the additional burden of producing other evidence to supplement the lack of probable cause. (HMS Capital, Inc. v. Lawyers Title Co. (2004) 118 Cal.App.4th 204, 218.) Probable cause relates only to the objective tenability of the prior claims, while malice relates to the defendants subjective state of mind. (Downey Venture, supra, at p. 498.)

In her complaint, Attig claimed that defendants act[ed] maliciously against [her] to cause her economic, financial and emotional hardship, to extort an unowed [sic] settlement from her and to put pressure on [her] to withdraw from activities within the equestrian industry. Defendants activities included a threat to drive her into personal bankruptcy and to destroy her reputation and financial status within the equestrian industry.

Attig offered her statements as evidence of defendants ill will and ulterior motives. In her declaration, as mentioned above, Attig described the circumstances of her termination, where Spencer Graffam accused her of stealing and threatened her with bankruptcy. To show that Spencer Graffam was not simply making empty threats, Attig noted that he and Jodi Graffam impeded her efforts to obtain unemployment benefits and sought a temporary restraining order to deprive her of the use of her property and assets. Although these claims remain subject to proof (i.e., being found credible by the factfinder), Attigs declaration satisfies the showing of minimal merit required to defeat defendants motion. (See Soukup, supra, 39 Cal.4th at p. 296.)

The trial court also took judicial notice of various documents, including this courts prior opinion in Castlebrooks appeal from the nonsuit in the underlying action. In that case, Castlebrook alleged several causes of action, including breach of contract, misappropriation of trade secrets, unfair competition, interference with prospective economic advantage, conversion, and fraud. In reviewing the trial courts ruling, we concluded that Castlebrook failed to offer sufficient evidence to support any of its causes of action. (Attig v. Castlebrook (Nov. 10, 2005, E036701) [nonpub. opn.].) We also reviewed the courts decision on Attigs motion for attorneys fees. We concluded that substantial evidence supported the courts finding that Castlebrook acted in bad faith in pursuing the action without any evidentiary support.

These conclusions, the lack of evidence or probable cause and Castlebrooks bad faith, and the factual basis for these conclusions are relevant in determining whether Castlebrook and the Graffams in the present case acted with malice. (See Downey Venture v. LMI Ins. Co., supra, 66 Cal.App.4th at p. 498, fn. 29; Bertero v. National General Corp. (1974) 13 Cal.3d 43, 53-54.) As discussed in the previous section, Attig presented evidence to show that the Graffams were key participants in the prior litigation and therefore may share responsibility with Castlebrook for any bad faith in making unfounded allegations and proceeding with the lawsuit despite the lack of evidentiary support. While the terms bad faith and malice are not synonymous and a precise definition for each term varies with the context (see, e.g., Gemini Aluminum Corp. v. California Custom Shapes, Inc. (2002) 95 Cal.App.4th 1249, 1262 [discussing bad faith as used in Civil Code section 3426.4]; Downey Venture, supra, at p. 495 [discussing the malice element for malicious prosecution cases]), in this case, there is an overlap in the factual basis for the finding of bad faith and the finding of malice. The evidence, therefore, was relevant and properly considered together with Attigs declaration in finding a prima facie showing of malice.

Nevertheless, as noted by defendants, the finding of bad faith in awarding attorneys fees in the underlying action does not have a collateral estoppel effect in the current action. Collateral estoppel, or issue preclusion, precludes relitigation of issues argued and decided in prior proceedings. [Citation.] [Citation.] The doctrine applies only if the decision in the initial proceeding was final and on the merits and the issue sought to be precluded from relitigation is identical to that decided in the first action and was actually and necessarily litigated in that action. [Citation.] In addition, the party against whom preclusion is sought must be the same as, or in privity with, the party to the first action. [Citation.] (Le Parc Community Assn. v. Workers Compensation Appeals Bd. (2003) 110 Cal.App.4th 1161, 1171.)

The finding of bad faith in the motion for attorneys fees was not a final judgment on the merits. Hearings on motions for attorneys fees do not replace lawsuits for malicious prosecution. (Wright v. Ripley (1998) 65 Cal.App.4th 1189, 1195 [involving an award of attorneys fees under Code of Civil Procedure section 128.5].) They are not full adjudications, but abbreviated procedures used for a limited purpose. (Wright, supra, at p. 1196; see also Benasra v. Mitchell Silberberg & Knupp (2002) 96 Cal.App.4th 96, 113-114; Lam v. Ngo (2001) 91 Cal.App.4th 832, 843-844.) It is difficult to imagine the extent to which judicial economy would be compromised if every lawyer against whom sanctions were sought understood that such an award would constitute a binding adjudication on issues of his or her unprofessional conduct. Regular court business would grind to a halt while lawyers exercised their full due process rights to fight the charges. (Wright v. Ripley, supra, at p. 1195.)

Furthermore, whether defendants acted in bad faith does not necessarily present the same issue as whether defendants acted with malice. The factual basis may overlap, but, while bad faith may be inferred when the case lacks evidence or merit, the same showing may be insufficient to establish malice. (See Gemini Aluminum Corp. v. California Custom Shapes, Inc., supra, 95 Cal.App.4th at p. 1265; Downey Venture v. LMI Ins. Co., supra, 66 Cal.App.4th at p. 498; see also Wilson v. Parker, Covert & Chidester, supra, 28 Cal.4th 811, 825, citing Sheldon Appel Co. v. Albert & Oliker (1989) 47 Cal.3d 864, 874-877.) Both involve a subjective component, but malice requires more direct evidence of the offending partys subjective intent. (Downey Venture, supra, at p. 499.) Because the issues are not identical, the court erred in assuming that the prior finding of bad faith precluded defendants from arguing that Attigs evidence was insufficient to establish malice.

As noted by defendants, the court also erred in precluding defendants from making future challenges concerning this element of Attigs malicious prosecution claim during the trial. The court, in ruling on an anti-SLAPP motion, is not being asked to make conclusive determinations concerning the facts. To defeat an anti-SLAPP motion, the plaintiff must show only a probability of prevailing on the merits of her claim. (See Soukup v. Law Offices of Herbert Hafif, supra, 39 Cal.4th at p. 291.) The courts role is limited to determining whether the claim has potential merit. (Navellier v. Sletten (2003) 106 Cal.App.4th 763, 768.) The court neither weighs the comparative strength of the parties evidence nor makes ultimate factual determinations. (Soukup, supra, at p. 291; see also Wilson v. Parker, Covert & Chidester, supra, 28 Cal.4th at p. 821.) While the defendant may offer competing evidence that does not justify a ruling in his favor on an anti-SLAPP motion, defeat at this stage does not preclude him from raising additional defenses and evidence during the trial.

The anti-SLAPP statute specifically provides: If the court determines that the plaintiff has established a probability that he or she will prevail on the claim, neither that determination nor the fact of that determination shall be admissible in evidence at any later stage of the case, or in any subsequent action, and no burden of proof or degree of proof otherwise applicable shall be affected by that determination in any later stage of the case or in any subsequent proceeding. (Code Civ. Proc., 425.16, subd. (b)(3).) Thus, while the trial court may find that the plaintiff has satisfied her minimal burden of establishing a prima facie case, it is beyond the courts authority to make an additional finding that the plaintiff has won her case or proven the elements of her claim.

In sum, we conclude that Attig satisfied her minimal burden of producing evidence to support the malice element of her cause of action for malicious prosecution. The court, therefore, properly denied defendants motion. Although the trial courts ruling on the motion remains intact, to the extent that the courts statements accompanying its ruling suggest that defendants cannot raise affirmative defenses and present other evidence and argument at trial, we disapprove of those statements as being beyond the scope of the courts authority in ruling on defendants motion.

2. Attorneys Fees

Defendants claim that the trial court again erred in awarding Attig attorneys fees under Code of Civil Procedure section 425.16, subdivision (c).

Code of Civil Procedure section 425.16, subdivision (c), provides in relevant part: If the court finds that a special motion to strike is frivolous or is solely intended to cause unnecessary delay, the court shall award costs and reasonable attorneys fees to a plaintiff prevailing on the motion, pursuant to Section 128.5. Code of Civil Procedure section 128.5, subdivision (b)(2), defines a frivolous motion as one that is totally and completely without merit or intended for the sole purpose of harassing an opposing party. The referenced section also requires that an award of expenses shall be in writing and shall recite in detail the conduct or circumstances justifying the order. (Code Civ. Proc., 128.5, subd. (c).) The trial courts ruling on a motion for attorneys fees is reviewed for an abuse of discretion. (Ibid.)

The trial court granted Attigs motion on the ground that the special motion to strike was frivolous. The court did not provide any reasons for its ruling. Because the court failed to recite the conduct or circumstances justifying its order, we cannot determine if the ruling was made in error.

To say that the motion was frivolous is insufficient. (Decker v. U.D. Registry, Inc. (2003) 105 Cal.App.4th 1382, 1392; Childs v. PaineWebber Incorporated (1994) 29 Cal.App.4th 982, 995-996.) As explained by one court, [T]he courts written order should be more informative than a mere recitation of the words of the statute. [Citations.] Recitation of the facts justifying a sanctions order fulfills the rudiments of due process in two ways. First, the recitation requirement ensures the power conferred by statute will not be abused. Second, in some cases the courts recitation will be an invaluable aid to a reviewing court in determining whether the trial court abused its discretion in awarding sanctions. (Childs, supra, at pp. 995-996.)

Because we cannot determine whether the reasons were adequate, the appropriate remedy is to remand the case to allow the court to either state its reasons for awarding sanctions or vacate its original ruling. (Decker v. U.D. Registry, Inc., supra, 105 Cal.App.4th at p. 1392; Childs v. PaineWebber Incorporated, supra, 29 Cal.App.4th at p. 997.)

Disposition

We affirm the trial courts ruling denying defendants anti-SLAPP motion, but reverse the courts award of attorneys fees. The case must be remanded to allow the court to state its reasons for granting Attigs request for attorneys fees at trial. Attigs request for sanctions on appeal is denied. Both parties shall bear their own costs on appeal.

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

s/Ramirez

P.J.

We concur:

s/Richli

J.

s/Miller

J.

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^[1] The factual summary is taken in part from our prior unpublished opinions in Jocer Enterprises, etc. v. Attig (E036701) filed Sept. 23, 2004, and Attig v. Graffam (E038107) filed May 9, 2005.