Posts Tagged ‘attorney fees’

Lawyer Misses “Stealth” SLAPP Action

One of our latest anti-SLAPP victories provides a beautiful illustration of a “stealth” SLAPP suit that the plaintiff’s attorney failed to recognize, to the great expense of his client.

In this case our (future) client’s business partner, we’ll call him Freddy Fraudster, opened a credit card account at a local bank using our client’s personal information. When our client discovered what Freddy had done, he contacted the bank and informed the personnel there that Freddy had committed fraud, and based on this report the bank closed the account and reported the matter to the police. Our client also filed a police report, and filed for a restraining order against Freddy.

Freddy was not happy. He had a long term relationship with the bank, and based on the report by our client, the bank closed his accounts and would have nothing further to do with him. Apparently thinking the best defense is a good offense, and hoping that winning the race to the courthouse might give him some leverage, Freddy filed an action against our client. He claimed that our client had authorized him to open the account, and that the report to the bank was therefore defamatory since it accused him of fraud.

Do you see why Freddy’s action in Superior Court was a SLAPP suit? We did, and we successfully brought an anti-SLAPP motion. You see, a SLAPP suit is one that tries to block a person’s right of petition. Freddy’s attorney realized that the report to the police and the application for the restraining order were protected rights of petition, but he mistakenly thought that the report to the bank, requesting that the credit card be cancelled, was not a petition for redress and therefore did not fall under the SLAPP statute because it did not involve any government agency. No doubt, he thought that by suing our client for defamation, he could make all his evil deeds go away and get back in good stead with the bank by offering to dismiss the case if our client would withdraw his remarks to the bank, court and police. Now it sounds like a SLAPP, doesn’t it?

The interpretation of the SLAPP statutes by Freddy’s attorney was far too narrow. Consider. One day you run a credit report on yourself and you find that someone has fraudulently opened a credit card in your name. What is the first thing you are going to do? Call an official government agency? You might do that eventually, but first you are going to call the credit card company and tell them to cancel the card. Thus, contacting the credit card company, or in our case the bank, is a natural part of the entire “right of petition.”

It’s very similar to the litigation privilege. I occasionally see cases where a defendant tries to sue the plaintiff and his attorney, claiming that the demand letter sent by the attorney was defamatory because it falsely claimed the defendant did something illegal. But under Civil Code section 47, anything said in conjunction with litigation is privileged and therefore not defamatory. The demand letter from the attorney takes place before legal action is ever filed, but it is still part of the litigation process.

So it was here. The report to the bank occurred before any “right of petition” was pursued with a government agency, but calling to cancel the credit card was a natural part of that process. If a plaintiff were permitted to SLAPP a defendant by focusing on the activities leading up to the actual right of petition, then the intent of the anti-SLAPP statutes would be subverted. We explained that to the court, and our motion was granted.

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SLAPP Plaintiff Escapes Attorney Fees

There is a basic concept concerning legal fees that some attorneys never seem to understand, so the same issue comes up in many variations. Say, for example, that Joe Attorney and Paul Plumber enter into a contract for some plumbing work at the attorney’s home. The contract provides for attorney fees to the prevailing party if they ever get into a contract dispute. Joe Attorney is not happy with the plumbing work, so he sues, and both parties represent themselves at the trial.

Under this scenario, regardless of who wins, neither party will recover any attorney fees, because there are no attorney fees. Paul represented himself, so it’s pretty obvious he has no basis for attorney fees, but often an attorney in these circumstances will improperly seek fees, claiming that he should be reimbursed for the time he spent on the case, just as though he had hired an attorney (so-called “opportunity costs”).  California courts have always rejected this argument, since no attorney was paid for the work, and there are therefore no attorney fees to recover. The fact that the prevailing party happened to be an attorney does not make him eligible for the money he lost fighting the case, anymore than the plumber should be paid for the time he spent prosecuting the case if he prevails.

But this simple reasoning does not keep attorneys from trying. In the latest example, the firm of Carpenter & Zuckerman sued attorney Paul Cohen and his professional corporation Personal Injury Solutions, Inc. Cohen cross-complained back against Carpenter & Zuckerman, alleging, among other things, defamation.

Carpenter & Zuckerman properly responded with an anti-SLAPP motion, which was granted. Cohen appealed, but lost, and Carpenter & Zuckerman filed a memorandum of costs under the anti-SLAPP statute for the attorney fees incurred on appeal (about $33,000). Here is where it gets interesting.

According to the opinion by the Court of Appeal, Carpenter & Zuckerman submitted a declaration from one of the firm’s associates, Candice Klein, attesting to the fact that she had been “retained” by her firm to represent it on appeal. She pointed out that she was not a partner in the firm, had no financial interest in the outcome of the appeal, and asserted that she was hired on an “independent contractor basis”.

It was a valiant effort to distance Ms. Klein from the firm, to create sufficient independence that the court might treat her as a retained attorney, but it didn’t fly with the trial court or the Court of Appeal. A law firm representing itself is not entitled to recover attorney fees, and that does not change when an associate is used. No attorney fees for Carpenter & Zuckerman. It probably didn’t help that Ms. Klien is a graduate of Southwestern University School of Law, one of the finest law schools in the country, creating the automatic assumption that she is really the one running the firm, partner or not.

In defense of Carpenter & Zuckerman, the argument had some merit. In a 2001 case called Gilbert v. Master Washer & Stamping Co., Inc., the Court of Appeal permitted an attorney fee award to a firm that was representing one of its own partners, but in that case the matter involved the partner’s “personal interests”. Similarly, Carpenter and Zuckerman were named individually in this case, but other cases have already held that that is not sufficient if the issues are the same as those asserted against the firm.

Anytime a law firm is sued, any recovery against it will detrimentally affect any partner. And when a law firm is sued in tort for the act of one or more of its lawyers, those lawyers are exposed to liability. In order to recover attorney fees for work done on behalf of individual attorneys in a law firm, there must be a showing that the fees sought to be recovered are not attributable to representation of the law firm. No such showing was made here. Thus, there was not sufficient evidence to overturn the trial court’s conclusion that the individual plaintiffs were not entitled to recover any attorney fees.

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A Recent Victory Illustrates anti-SLAPP Motion Application

A recent anti-SLAPP victory by our office serves to illustrate the application of the anti-SLAPP laws and how the process, that was meant to quickly dispose of SLAPP cases, can get so convoluted.

The Case of the Outraged City Council Member

In this case, our (future) client addressed a city council meeting on a matter she felt was important to the city. Specifically, the city had been rocked by some controversy involving city council members, and our client was speaking to the issue of how the newly-elected council members should go about performing their duties. To illustrate the point, she cited the example of a former council member who had taken money from special interests. The city council member in question took umbrage with the accusation that she had acted unethically, and sued our client for defamation. We were retained to fight the defamation action.

It is seldom that we are presented with such a clear SLAPP suit. Remember, SLAPP stands for Strategic Lawsuit Against Public Participation. What better example of public participation is there than a citizen addressing their city council? Indeed, under Civil Code section 47, any comments made during a “legislative proceeding” are absolutely privileged (meaning they can never be defamatory). Better yet from the standpoint of an anti-SLAPP motion, section 425.16(e)(1) provides that statements made before a legislative proceeding are protected speech.

So let’s run the facts through the two prongs of the anti-SLAPP analysis. First, as counsel for the defendant, it was our burden to show that the speech was protected within the meaning of the anti-SLAPP statute. That was a no-brainer in this instance, since the words were spoken at a city council meeting. And since the conduct falls under a specific anti-SLAPP section of 425.16, there was no need to show that the topic was a matter of public interest. “Any matter pending before an official proceeding possesses some measure of ‘public significance’ owing solely to the public nature of the proceeding, and free discussion of such matters furthers effective exercise of the petition rights § 425.16 was intended to protect.” (Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th 1106, 1118.)

Our having shown that the speech was protected, the second prong of the anti-SLAPP analysis requires plaintiff to show a reasonable likelihood of success on her claim, which in this case would be impossible. Since section 47 makes speech at a city council meeting absolutely privileged, the speech by definition cannot constitute defamation.

So a slam-dunk anti-SLAPP motion, right? Not quite.

A SLAPP motion puts a stay on all discovery, which is one of the primary benefits of an anti-SLAPP motion because it keeps the plaintiff from using the discovery process as a sledgehammer to try to wear down the defendant. In this case, counsel for Plaintiff had served discovery prior to the anti-SLAPP motion, and argued that the court should permit that discovery prior to ruling on the anti-SLAPP. There is authority for the proposition that a plaintiff should be permitted to conduct discovery to determine whether the defendant acted with malice, because that takes away certain privileges under section 47. However, there is no malice exception for words spoken at a city council meeting, so no amount of discovery by the Plaintiff could have revealed information that would have defeated the anti-SLAPP motion.

Nonetheless, the court granted Plaintiff’s request for discovery, and that added two months to the process. It could have been that the court just did not understand the authorities we provided, but more likely the court was bending over backwards to give the plaintiff access to discovery, specifically because the judge knew she was going to grant the motion, and did not want Plaintiff to have any possible basis for appeal. In that sense, the judge might have done us a favor, but it is frustrating to deal with a frivolous action for an additional two months. We were successful, though, in limiting greatly limiting the discovery. The court denied Plaintiff’s request to take our client’s deposition.

As expected, the discovery revealed nothing useful to the Plaintiff. Instead, the Plaintiff attempted to argue that the conduct by Defendant was “illegal” and therefor not protected. This was another instance where there is authority for the proposition being claimed, but that legal theory had no application to the case at hand. In the case of Flatley v. Mauro, an attorney had sent threatening letters to someone, threatening to sue him if he did not pay a large settlement to a client. Normally, a letter from an attorney in anticipation of litigation would be protected speech under the litigation privilege, but the Flatley court ruled that the attorney’s letters had risen to the level of extortion, and were therefor illegal and unprotected.

Plaintiff was trying to say that our client’s speech at the city council meeting was illegal and therefor unprotected according to Flatley. And how could speech at a city council meeting ever be illegal, you ask? According to Plaintiff, it was illegal because the city council’s own guidelines state that comments should be civil, and Defendant’s comments had not been civil.

Predictably, the court understood that even if the words were interpreted to be rude, a city council’s guidelines do not amount to law, and violating them does not amount to criminal conduct. The court granted our anti-SLAPP motion, striking the defamation complaint and entering judgment in our favor. The court also awarded us over $18,000 in attorney fees against the Plaintiff.

— Aaron Morris
Morris & Stone

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Aaron Morris, Attorney
Aaron Morris
Morris & Stone, LLP

Tustin Financial Plaza
17852 17th St., Suite 201
Tustin, CA 92780

(714) 954-0700

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