Opinion
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
APPEAL from a judgment of the Superior Court of Los Angeles County. Terry A. Green, Judge. Los Angeles County Super. Ct. No. BC355689
Law Offices of Jason J. Lee & Associates and Charles Domokos for Plaintiff and Appellant.
Robie & Matthai, Edith R. Matthai and Natalie A. Kouyoumdjian for Defendant and Respondent.
ZELON, J.
This appeal arises from a malicious prosecution action brought by Appellant Alpha First Choice of U.S.A., Inc. (“Alpha”) against Respondent William Rosensweig (“Rosensweig”). Rosensweig, an attorney, represented D.I.T. Export Import Company, Inc. (“D.I.T.”) in a breach of contract action that D.I.T. filed against Alpha. After Alpha obtained summary judgment in the breach of contract action, it brought suit against both D.I.T. and Rosensweig for malicious prosecution. Rosensweig responded by filing a special motion to strike under Code of Civil Procedure section 425.16, the anti-SLAPP statute. The trial court granted the special motion to strike on the grounds that Alpha did not make a prima facie showing that Rosensweig filed or pursued the breach of contract action without probable cause and with malice. On appeal, Alpha argues that the trial court erred in granting the special motion to strike because Alpha established a probability of prevailing on the merits of each element of its malicious prosecution claim. We conclude that because Alpha did not demonstrate a probability of proving that Rosensweig commenced or pursued the breach of contract action against Alpha without probable cause, the trial court properly granted the special motion to strike. Accordingly, we affirm.
SLAPP is an acronym for “Strategic Lawsuit Against Public Participation.” (Jarrow Formulas, Inc., v. LaMarche (2003) 31 Cal.4th 728, 732, fn. 1.) Unless otherwise indicated, all statutory references are to the Code of Civil Procedure.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
I. The Breach Of Contract Action Against Alpha
A. Dispute Between Alpha And D.I.T.
The underlying breach of contract action arose out of a failed sales transaction between two small businesses, Alpha and D.I.T. Alpha is a retail and wholesale business owned by Raymond Isaac (“Isaac”) that sells “close out” goods to the public at discount prices. D.I.T. is a small export-import company owned by Doron Aroussi (“Aroussi”). Isaac and Aroussi were introduced by a mutual friend, Menachem Benlulu (“Benlulu”). In November 2003, Benlulu approached Isaac and advised him that Aroussi had clothing and other merchandise from Sears that he wanted to sell. Benlulu offered to broker a transaction between the parties in exchange for a commission.
On or about November 10, 2003, Isaac, Aroussi and Benlulu met at D.I.T.’s office to discuss a potential deal. According to Isaac, Aroussi offered to sell Alpha 10,777 items of “pull shelf” goods for $50,000. As described by Isaac, “pull shelf” goods are the highest quality of “close out” goods. They are new, undamaged and unsold items which are pulled off the shelves of retail stores to make room for newer merchandise. “Close out” goods of a lesser quality range from “returned” goods to “damaged” goods to “broken but repairable” goods to “junk.” Isaac asserted that, during this meeting, Aroussi assured him that all of the goods he was offering to sell were “pull shelf” goods and did not include any damaged or returned items. Isaac also asserted that, although Aroussi initially wanted the payment up front, the parties agreed that Alpha would deposit $50,000 with Benlulu to hold in trust until Isaac had an opportunity to inspect the merchandise and determine that it was satisfactory. Isaac thereafter provided Benlulu with $15,000 in cash and a check made payable to D.I.T. for $35,000. Instead of holding the money in trust, however, Benlulu delivered both the $15,000 cash payment and the $35,000 check to Aroussi as soon as he received it.
On or about November 12 or 13, 2003, the merchandise was delivered to Alpha’s place of business where Isaac, Aroussi, and Benlulu were waiting. The goods were delivered in boxes and consisted of clothing, watches, and electronic merchandise. According to Isaac, he inspected the goods shortly after delivery and determined that they were not of the quality or quantity that Aroussi had promised. Isaac stated that the quality of the merchandise delivered consisted of “returned” and “damaged” items rather than “pull shelf” goods. He further stated that, based on the number of boxes delivered, the quantity of the merchandise appeared to be much less than 10,777 items and he later determined that the actual quantity was 7,480 items. Benlulu asserted that he also inspected one of the boxes and found that nothing in that box was in working order.
After inspecting the merchandise, Isaac informed Aroussi that Alpha was rejecting the goods because they were non-conforming, and he demanded that Aroussi take back all of the merchandise. However, according to Isaac, Aroussi refused to take back any of the goods because Alpha had opened three of the boxes during its inspection. Aroussi also refused to provide Isaac with a copy of the paperwork that the delivery person had handed to Aroussi upon the arrival of the goods at Alpha’s warehouse. The parties argued about the matter for a period of time at Alpha’s warehouse and Aroussi eventually left without taking the goods or returning the money paid by Alpha. Later that evening, Isaac requested that his bank place a “stop payment” on the $35,000 check to D.I.T. After Aroussi learned that Isaac had stopped payment on the check, he informed Isaac that his attorney would be calling him.
In or about November 2003, Aroussi retained Rosensweig to represent D.I.T. in its dispute with Alpha. According to Rosensweig, Aroussi told him that Alpha had contracted with D.I.T. to purchase merchandise. Aroussi also told him that Alpha had placed a “stop payment” on the check to D.I.T. after the merchandise had been delivered, claiming that the merchandise did not meet its expectations. In addition, Aroussi provided Rosensweig with various documents pertaining to the parties’ alleged agreement. One of these documents was a handwritten note dated November 10, 2003 and purportedly signed by Isaac. The note identified four categories of merchandise by type and quantity and stated that the merchandise was “all sold as-is.” The note did not include any other terms of the parties’ alleged contract such as price, time and manner of payment, or time and place of delivery. A second document provided to Rosensweig was a sales order on D.I.T. letterhead dated November 10, 2003, but not signed by either party. The sales order listed the same categories of merchandise described in the handwritten note and identified the merchandise by type, quantity requested and shipped, unit price, and total price. The terms regarding types and quantities shipped were consistent with those contained in the handwritten note. Like the handwritten note, the sales order stated that the merchandise was sold “as-is.” But unlike the handwritten note, the sales order identified the majority of the merchandise as “store returns” and indicated that all sales were “final” with no returns or credit allowed. In addition to these documents, Aroussi provided Rosensweig with a copy of a check dated November 10, 2003 from Alpha to D.I.T. for $35,000.
The categories of merchandise identified in the November 10, 2003 handwritten note were as follows: (1) 65 digital cameras, (2) 16 notebook computers, (3) 18 boxes of watches (approximately 7,200 pieces), and (4) 23 pallets of clothing.
Shortly after being retained as counsel for D.I.T., Rosensweig contacted Isaac. According to Isaac, Rosensweig tried to convince him to mediate his dispute with D.I.T. and told him that Aroussi would reduce the price. Rosensweig also purportedly told Isaac that he should send more money because the payment on the $35,000 check had been stopped and that Rosensweig would be responsible for what Aroussi did once the money was received. However, Isaac declined to do any further business with D.I.T. and asked Rosensweig to arrange for D.I.T. to retrieve the goods and to return the $15,000 cash payment. D.I.T. did not agree to do so.
B. The Ensuing Breach Of Contract Suit
On December 16, 2003, Rosensweig filed a breach of contract action against Alpha on behalf of D.I.T. The verified complaint alleged that the parties entered into a written contract on November 10, 2003 and that Alpha breached the contract by stopping payment on the check for $35,000 after the merchandise had been delivered. The complaint sought compensatory damages for breach of contract and statutory damages under Civil Code section 1719 for stopping payment on the check. Alpha thereafter retained Jeanne Collachia (“Collachia”) to represent it in the breach of contract action and filed an answer to D.I.T.’s complaint on January 15, 2004.
During the course of the litigation, Rosensweig did not take any discovery on behalf of D.I.T. On or about May 24, 2004, Rosensweig served D.I.T.’s responses to written discovery propounded by Alpha. In certain of its discovery responses, D.I.T. appeared to concede that there was no written contract between the parties. For instance, in response to a request for documents that evidence “any business relationship whatsoever ever entered into” between D.I.T. and Alpha, D.I.T. responded that there were no documents. In response to an interrogatory that asked D.I.T. to identify each document that is part of the agreement alleged in the pleadings, D.I.T. responded that “[t]here are no such documents that are part of the agreement.” In other responses, however, D.I.T. indicated that there was a written agreement that was breached by Alpha when it stopped payment on the $35,000 check. For example, in response to a request for admission, D.I.T. denied that it never entered into a written contract with Alpha and stated that its denial was based on the fact that there was a written agreement between the parties. In response to a document request for the written contract allegedly entered into by the parties on November 10, 2003, D.I.T. responded that it was producing the contract and it did produce a copy of the November 10, 2003 handwritten note.
D.I.T. did not produce the November 10, 2003 sales order in discovery even though it was responsive to Alpha’s document requests and was in Rosensweig’s possession at the time he served D.I.T.’s responses.
After receiving D.I.T.’s discovery responses, Collachia sent a letter dated June 8, 2004 to Rosensweig. In this letter, Collachia identified the discovery responses in which D.I.T. appeared to concede that there was no written contract. She argued that D.I.T. could not possibly prevail in its breach of contract action given the absence of any written agreement between the parties and that Alpha had an absolute right to inspect the goods and to reject them as non-conforming. Collachia also asserted that Alpha would move for summary judgment if D.I.T. did not dismiss the action with prejudice and would seek legal recourse against both D.I.T. and Rosensweig through a suit for malicious prosecution. In addition to sending this letter, Collachia spoke with Rosensweig approximately eight to 12 times during the course of the litigation. According to Collachia, she repeatedly told Rosensweig that D.I.T. should dismiss the action because it had no basis in law and would be costly for both parties to litigate, but that Rosensweig’s response was simply that they would settle the matter in mediation.
The parties did agree to a mediation which was scheduled for December 31, 2004. It was cancelled, however, due to the mediator’s illness.
At the time Rosensweig commenced the breach of contract suit in December 2003, D.I.T. was an operational corporation with its principal place of business in Los Angeles, California. During the first part of 2004, however, D.I.T. ceased operations. Although D.I.T. purportedly remained a corporation in good standing, its business address ceased to exist and Rosensweig began communicating with Aroussi directly at his P.O. Box address.
In or about July 2004, Aroussi informed Rosensweig that he was going to Israel and would be returning to the United States in early September 2004. Aroussi provided Rosensweig with various telephone numbers and an email address where he purportedly could be reached. In mid-September 2004, Aroussi called Rosensweig and advised him that he would not be returning until the third week in September. When Rosensweig did not hear from Aroussi in late September, he began trying to contact him. According to Rosensweig, he called Aroussi at least a dozen times over the next two months, but was unable to reach him directly or to leave any messages because the voicemail boxes for his various telephone numbers were full. Rosensweig also sent Aroussi at least a dozen emails in which he advised Aroussi that he could not continue to represent D.I.T. in its lawsuit against Alpha given Aroussi’s failure to communicate and cooperate with counsel. Rosensweig eventually informed Aroussi via email that he intended to withdraw as counsel for D.I.T, but he still did not receive any response from Aroussi.
C. Alpha’s Motion For Summary Judgment
On September 27, 2004, around the time that Aroussi was scheduled to return to the United States, Alpha filed and served a motion for summary judgment in the breach of contract action. The hearing on the summary judgment motion originally was set for February 23, 2005. In its moving papers, Alpha argued that it had an oral agreement with D.I.T. to purchase goods of a specific quality and quantity and that Alpha rightfully rejected the goods because they did not conform to the parties’ contract. In support of its motion, Alpha submitted declarations from both Isaac and Benlulu which stated that D.I.T. had agreed that Alpha would have an opportunity to inspect the goods before accepting them, that the goods delivered by D.I.T. were non-conforming, and that D.I.T. refused to take back the goods or to return the payments made by Alpha.
On November 24, 2004, approximately two months after Alpha filed and served its summary judgment motion, Rosensweig brought a motion to be relieved as counsel for D.I.T. based on Aroussi’s failure to cooperate in the prosecution of his case. On January 24, 2005, the trial court granted Rosensweig’s motion. The court then continued the hearing on Alpha’s summary judgment motion to March 25, 2005 and also set an order to show cause re: dismissal for that date.
On March 25, 2005, the trial court held the hearing on Alpha’s motion for summary judgment and the order to show cause re: dismissal. Collachia appeared on behalf of Alpha. D.I.T. did not make an appearance and did not file an opposition to the summary judgment motion. The court first ruled on the order to show cause and initially dismissed the breach of contract action because D.I.T. was not represented by counsel as required for a corporation. Collachia then requested that the court also rule on Alpha’s summary judgment motion. In response, the court stated “I agree with your motion for summary judgment,” but asked Collachia why it was necessary given that it was dismissing the case with prejudice. Collachia indicated that Alpha wanted to pursue a malicious prosecution action and that she was concerned the dismissal would not be a ruling on the merits. The court then stated as follows:
“So what you’re saying is we don’t have to dismiss the case. We would have to grant your motion for summary judgment. Okay. The court . . . sets aside its dismissal . . . against the plaintiff and the court grants . . . the defendant’s motion for summary judgment. And you prepare the judgment, submit it to us. We’ll sign it. There’s no opposition.”
On March 30, 2005, the court signed the order for entry of summary judgment submitted by Alpha. The order stated that “the Court finds that there is no triable issue of material fact” and that Alpha “is entitled to judgment as a matter of law under California Code of Civil Procedure section 437c.” The order also stated that the reasons for this determination were that Alpha “did not breach any contract with [D.I.T.]” because Alpha “rightfully rejected non-conforming goods” and that Alpha “had a good faith dispute with [D.I.T.]” because D.I.T. “tendered non-conforming goods to [Alpha] and [Alpha] attempted to work out this good faith dispute by requesting that [D.I.T.] take back these non-conforming goods.” The court entered judgment in favor of Alpha and against D.I.T.
II. The Malicious Prosecution Action Against Rosensweig
On July 20, 2006, Alpha filed a malicious prosecution action against both Rosensweig and D.I.T. Alpha was unable to serve D.I.T. with the complaint, however, because the corporation was no longer in existence. On September 7, 2006, Rosensweig responded to the complaint on his own behalf by filing a special motion to strike under the anti-SLAPP statute. In his motion to strike, Rosensweig argued that Alpha could not demonstrate a probability of prevailing on its malicious prosecution suit because (1) the underlying breach of contract action had not terminated in Alpha’s favor, (2) Rosensweig had probable cause to file and pursue a claim for breach of contract on behalf of D.I.T., and (3) Rosensweig did not initiate the breach of contract action with malice.
On November 21, 2006, the trial court granted Rosensweig’s special motion to strike. The court concluded that while the underlying breach of contract action had been terminated in Alpha’s favor, Alpha had not established a probability of prevailing on the elements of probable cause or malice. On December 21, 2006, the court entered judgment in favor of Rosensweig and dismissed the malicious prosecution action against him with prejudice. Alpha thereafter filed a timely appeal.
On January 11, 2007, Rosensweig filed a post-judgment motion for attorney’s fees and costs under the anti-SLAPP statute. The court awarded Rosensweig attorney’s fees in the amount of $10,323 and costs in the amount of $58.70.
DISCUSSION
I. Standard Of Review
Section 425.16, the anti-SLAPP statute, 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 under section 425.16 requires a two-step process. First, the defendant must make a threshold showing that the challenged cause of action arises from constitutionally protected activity. (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67.) If the defendant satisfies this prong, the burden shifts to the plaintiff to demonstrate a probability of prevailing on the merits of the action. (Ibid.) We review a trial court’s ruling on a special motion to strike under a de novo standard of review, “conducting an independent review of the entire record. [Citations.]” (HMS Capital, Inc. v. Lawyers Title Co. (2004) 118 Cal.App.4th 204, 212.) In this case, Alpha concedes that a claim for malicious prosecution arises from constitutionally protected activity and is subject to a special motion to strike under section 425.16. (Jarrow Formulas, Inc. v. LaMarche, supra, 31 Cal.4th at p. 741 (An “action is not exempt from anti-SLAPP scrutiny merely because it is one for malicious prosecution.”).) Accordingly, the issue on appeal is whether Alpha met its burden of demonstrating a probability of prevailing on the merits of its malicious prosecution action against Rosensweig.
Alpha also appeals the trial court’s post-judgment award of attorney’s fees and costs to Rosensweig, arguing that because the court erred in granting the special motion to strike, Rosensweig was not a “prevailing defendant” under the anti-SLAPP statute and was not entitled to recover his fees or costs. (§ 425.16, subd. (c).). For the reasons set forth below, we need not separately address this issue.
II. Probability Of Prevailing On The Merits Of The Action
To demonstrate a probability of prevailing on the merits of the challenged cause of action, “‘the plaintiff must ‘state[ ] and substantiate[ ] a legally sufficient claim.’ [Citation.]” (Jarrow Formulas, Inc. v. LaMarche, supra, 31 Cal.4th at p. 741.) The plaintiff therefore must make a prima facie showing of facts that would, if proven, support a judgment in his or her favor. (Wilson v. Parker, Covert & Chidester (2002) 28 Cal.4th 811, 821.) For purposes of this inquiry, “the trial court considers the pleadings and evidentiary submissions of both the plaintiff and the defendant [citation].” (Ibid.) However, “‘the court does not weigh the evidence or make credibility determinations. [Citations.]’” (Ross v. Kish (2006) 145 Cal.App.4th 188, 197.) The court must accept as true the evidence favorable to the plaintiff and consider the defendant’s opposing evidence only to determine if it defeats the plaintiff’s showing as a matter of law. (Flatley v. Mauro (2006) 39 Cal.4th 299, 326; Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 291.) Although “the court does not weigh the credibility or comparative probative strength of competing evidence, it should grant the motion if, as a matter of law, the defendant’s evidence supporting the motion defeats the plaintiff’s attempt to establish evidentiary support for the claim. [Citation.]” (Wilson v. Parker, Covert & Chidester, supra, at p. 821.)
To prevail on a malicious prosecution claim, a plaintiff must plead and prove that the prior lawsuit (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. (Soukup v. Law Offices of Herbert Hafif, supra, 39 Cal.4th at p. 292.) “[C]ontinuing to prosecute a lawsuit discovered to lack probable cause” also may support an action for malicious prosecution. (Zamos v. Stroud (2004) 32 Cal.4th 958, 973.) In ruling on Rosensweig’s special motion to strike, the trial court concluded that the prior breach of contract action was terminated in Alpha’s favor, but that Alpha failed to make a prima facie showing that Rosensweig brought the action without probable cause and with malice. For the reasons set forth below, we affirm.
A. Favorable Termination
The favorable termination element of a malicious prosecution claim is established by showing that the termination of the prior lawsuit “‘reflect[ed] on the merits of the action and the plaintiff's innocence of the misconduct alleged. [Citations.]’” (Ross v. Kish, supra, 145 Cal.App.4th at p. 198.) A “‘favorable’ termination does not occur merely because a party complained against has prevailed in an underlying action.” (Lackner v. LaCroix (1979) 25 Cal.3d 747, 751.) “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.” (Ibid.) On the other hand, a termination is favorable for malicious prosecution purposes “‘when it reflects “the opinion of someone, either the trial court or the prosecuting party, that the action lacked merit or if pursued would result in a decision in favor of the defendant.”’ [Citation.]” (Cantu v. Resolution Trust Corp. (1992) 4 Cal.App.4th 857, 881.) A favorable termination has been found “where the court in the underlying action: (1) granted summary judgment and issued sanctions because the claim was meritless (Mattel, Inc. v. Luce, Forward, Hamilton & Scripps (2002) 99 Cal.App.4th 1179, 1191); (2) granted summary judgment because there was insufficient evidence to establish a triable issue of fact (Sierra Club Foundation v. Graham (1999) 72 Cal.App.4th 1135, 1149–1150 (Sierra Club)); or (3) held that the defendant, as a matter of law, violated no duty to the plaintiff (Ray v. First Federal Bank (1998) 61 Cal.App.4th 315, 318 (Ray)).” (Casa Herrera, Inc. v. Beydoun (2004) 32 Cal.4th 336, 342.)
Rosensweig argues that the breach of contract action was not terminated in Alpha’s favor because the trial court did not evaluate the merits of Alpha’s summary judgment motion and determine that D.I.T.’s claims lacked merit. Rather, Rosensweig contends, the trial court granted summary judgment based solely on D.I.T.’s failure to oppose the motion. However, the transcript of the summary judgment hearing reflects that the trial court did make a ruling on the merits of the motion. During the hearing, the court specifically stated on the record that it “agree[d] with [Alpha’s] motion for summary judgment.” The record also reflects that the court granted the motion with an awareness that its ruling would form the basis for a subsequent malicious prosecution suit by Alpha. Indeed, the court asked Alpha’s counsel if she was seeking a ruling on the summary judgment motion so that Alpha could bring a malicious prosecution action, and when counsel responded affirmatively, the court set aside its dismissal in order to make such a ruling. In addition, the court approved and signed a proposed judgment which stated that there was no triable issue of fact and that Alpha was entitled to judgment as a matter of law because it “did not breach any contract with [D.I.T.]” and “rightfully rejected non-conforming goods.” The language of the judgment further demonstrates that the trial court’s ruling was based on the substantive merits of the motion.
Rosensweig asserts that the trial court could not have ruled on the merits of Alpha’s motion because it did not hear argument on both sides. However, since D.I.T. did not oppose the motion or appear at the hearing, there was no argument on “the other side” for the court to hear. Moreover, contrary to Rosensweig’s claim, the court did not grant summary judgment on the technical grounds that D.I.T. failed to file an opposition. Rather, the lack of an opposition was relevant to the court’s ruling on the merits of the motion because it resulted in D.I.T. failing to present any evidence to rebut the evidence submitted by Alpha, and thus, failing to create a triable issue of fact as to whether Alpha rightfully rejected the goods. The trial court’s grant of summary judgment on the grounds that there was no triable issue of fact and Alpha was entitled to judgment as a matter of law was a “favorable” termination on the merits of the case.
D.I.T. was served with the summary judgment motion on September 27, 2004 while it still was represented by Rosensweig and it remained represented by Rosensweig until January 24, 2005, one month before the originally scheduled summary judgment hearing. D.I.T. therefore had adequate notice of the motion and could have filed an opposition through Rosensweig or new counsel. It chose not to do so.
Alternatively, Rosensweig argues that, even if the grant of summary judgment established a favorable termination against D.I.T., the ruling could not be considered a favorable termination against Rosensweig. Because we find that there was a sufficient showing of probable cause, as discussed below, we need not reach this issue.
B. Probable Cause
To state a prima facie case for malicious prosecution, Alpha also must demonstrate that the underlying breach of contract action was commenced or pursued without probable cause. (Zamos v. Stroud, supra, 32 Cal.4th at pp. 965-966.) “The question of probable cause is ‘whether, as an objective matter, the prior action was legally tenable or not.’ [Citation.]” (Soukup v. Law Offices of Herbert Hafif, supra, 39 Cal.4th at p. 292.) The resolution of that question requires an objective determination of the reasonableness of the underlying lawsuit based on the facts known to the malicious prosecution defendant. (Sheldon Appel Co. v. Albert & Oliker (1989) 47 Cal.3d 863, 878.) The test to be applied is whether “any reasonable attorney would have thought the claim tenable.” (Id. at p. 886) If any reasonable attorney would have considered the underlying action to be legally tenable, then probable cause is shown.
Probable cause may exist even where the underlying lawsuit lacks merit. (Jarrow Formulas, Inc. v. LaMarche, supra, 31 Cal.4th at p. 743, fn. 13.) “‘Counsel and their clients have a right to present issues that are arguably correct, even if it is extremely unlikely that they will win . . .’ [Citation.]” (Sheldon Appel Co. v. Albert & Oliker, supra, 47 Cal.3d at p. 885.) Reasonable lawyers also “‘can differ, some seeing as meritless suits which others believe have merit, and some seeing as totally and completely without merit suits which others see as only marginally meritless.’” (Jarrow Formulas, Inc. v. LaMarche, supra, at p. 743, fn. 13, quoting Roberts v. Sentry Life Insurance (1999) 76 Cal.App.4th 375, 382.) “Only those actions that any reasonable attorney would agree are totally and completely without merit may form the basis for a malicious prosecution suit. [Citations.]” (Zamos v. Stroud, supra, 32 Cal.4th at p. 970.)
Because the standard for probable cause is objective rather than subjective, the adequacy of an attorney’s factual investigation or legal research prior to filing suit is irrelevant to the probable cause determination. (Sheldon Appel Co. v. Albert & Oliker, supra, 47 Cal.3d at pp. 882-883.) Additionally, in making an initial assessment of tenability, an attorney is entitled to rely on the information provided by his or her client, unless the attorney is on notice of specific factual errors in the client’s version of events that render the claim untenable. (Swat-Fame, Inc. v. Goldstein (2002) 101 Cal.App.4th 613, 625-627, disapproved on other grounds in Zamos v. Stroud, supra, 32 Cal.4th at p. 973.) Even when an attorney obtains evidence that appears to present a complete defense, the attorney may act reasonably in going forward with the lawsuit if there is a possibility that the defense will, on further evidence or examination, “prove less than solid.” (Zamos v. Stroud, supra, at p. 970, fn. 9.) However, an attorney who has probable cause to commence a lawsuit may be liable for malicious prosecution if he or she continues to prosecute the action after learning it is not supported by probable cause. (Id. at p. 973.)
However, “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.” (Sheldon Appel Co. v. Albert & Oliker, supra, 47 Cal.3d at p. 883.)
1. Rosensweig Had Probable Cause To Commence The Breach Of Contract Action.
Based on the information provided to Rosensweig prior to filing suit, we conclude that a reasonable attorney would have considered a claim for breach of contract against Alpha to be legally tenable. When D.I.T. first retained Rosensweig to represent it in its dispute with Alpha, Aroussi informed Rosensweig that Alpha had contracted with D.I.T. to purchase merchandise and that Alpha had placed a “stop-payment” on the check to D.I.T. after the merchandise had been delivered, claiming it did not meet its expectations. In addition to these oral representations, Aroussi provided Rosensweig with documents which, on their face, supported Aroussi’s claim that there was a contract between the parties and that the contract was for the sale of “as-is” goods.
Specifically, the November 10, 2003 handwritten note appears to evidence the existence of a written contract between Alpha and D.I.T. Although Alpha contends that the document is not a legally enforceable contract under the statute of frauds, there is at least a tenable argument that the handwritten note satisfies the requirements of California Uniform Commercial Code section 2201, which sets forth a liberal statue of frauds for commercial transactions between merchants. (Cal. U. Com. Code, § 2201, subd. (1).) Under the statute, a contract for the sale of goods for the price of $500 or more is not enforceable “unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought.” (Ibid.) However, the writing need not state all the material terms of the contract and “is not insufficient because it omits or incorrectly states a term agreed upon.” (Ibid.) The “[o]nly three definite and invariable requirements” for a writing to comply with this statute of frauds are that (1) it evidences a contract for the sale of goods; (2) it is signed by the party to be charged; and (3) it specifies a quantity of goods. (Cal. U. Com. Code, § 2201, Official Coms. to U. Com. Code, com. 1.) While the quantity term must appear, all other terms (including price, time and place of payment or delivery, the general quality of the goods, and any particular warranties) may be omitted. (Ibid.) Here, the handwritten note arguably satisfies the statute of frauds because it evidences a contract for the sale of goods to Alpha, it is purportedly signed by Alpha’s principal, and it specifies a quantity for each good being sold.
The November 10, 2003 sales order also supports that there was a contract between the parties for the sale of “as-is” goods. As identified in the sales order, the terms concerning the type of merchandise (digital cameras, notebook computers, watches, and clothes), the quantity of merchandise (18 boxes of watches, 23 pallets of clothing, etc.), and the quality of merchandise (all sold “as-is”) are consistent with the terms in the handwritten note. Because it is unsigned, the sales order does not, on its face, constitute an enforceable written contract between Alpha and D.I.T. Nevertheless, for purposes of evaluating the tenability of D.I.T.’s case, the document provided Rosensweig with some corroboration for Aroussi’s claim that the parties entered into a transaction for the sale of “as-is” goods. Based on the contents of these documents as well as Aroussi’s oral representations to Rosensweig, a reasonable attorney could conclude that a claim against Alpha for breach of contract was legally tenable.
Alpha asserts that the sales order should not be considered evidence of the parties’ agreement because D.I.T. took the document from the delivery person upon arrival of the goods and then refused to provide a copy to Alpha. While this supports Alpha’s argument that the sales order was not intended to be an enforceable written contract between the parties, it does not demonstrate an absence of probable cause. The document still offered some corroboration for D.I.T.’s claim that the parties’ agreement was for “as-is” goods and that “as-is” goods were delivered.
Alpha argues that it made a prima facie showing that the lawsuit lacked probable cause because it had an absolute right to inspect the goods before acceptance and to reject them as non-conforming. Alpha is correct that it did have a right to inspect the goods upon delivery and that the inclusion of the “as-is” language in the alleged contract did not waive this right. (Cal. U. Com. Code, § 2513, Official Coms. to U. Com. Code, com. 1 [“[N]o agreement by the parties can displace the entire right of inspection except where the contract is simply for the sale of ‘this thing.’ Even in a sale of boxed goods ‘as is’ inspection is a right of the buyer, since if the boxes prove to contain some other merchandise altogether the price can be recovered back.”].) However, Alpha’s right of inspection does not demonstrate a lack of probable cause because the underlying issue in the breach of contract action was not whether Alpha “inspected” the goods in breach of the parties’ agreement. Rather, the issue was whether Alpha rightfully “rejected” the goods as non-conforming. (Cal. U. Com. Code, § 2601 [“[I]f the goods or the tender of delivery fail in any respect to conform to the contract, the buyer may . . . [¶] . . . reject the whole . . .”].) Accordingly, the determination of probable cause depends on whether there was a legally tenable claim that the goods which D.I.T. delivered to Alpha did in fact conform to the parties’ contract.
With respect to the quality of goods, Alpha contends that the delivered goods were non-conforming because the parties orally agreed that all goods would be “pull shelf” goods and would not include any “damaged” or “returned” items. Alpha submitted a declaration from Isaac to this effect in support of its summary judgment motion. However, in assessing the tenability of D.I.T.’s claim, Rosensweig could rely on the November 10, 2003 handwritten note which Isaac allegedly signed and which arguably constitutes an enforceable written contract between the parties. Notably, the handwritten note does not contain any reference to “pull shelf” goods, but rather states that all goods were sold “as-is.” At the very least, this document provided Rosensweig with a tenable basis to assert that as long as the goods were of the type (digital cameras, notebook computers, watches, and clothes) agreed upon in writing, Alpha could not rightfully reject the goods because they were not of the “pull shelf” quality that it expected.
Alpha claims that the parties’ oral agreement regarding “pull shelf” goods is consistent with the “as-is” language in the documents because “pull shelf” goods are simply one type of “as-is” goods. While Alpha certainly could raise this argument in its defense, it does not show that the breach of contract suit was completely without merit. Rosensweig still had a reasonable counter-argument that the “pull shelf” term in the oral agreement directly contradicted the “as-is” term in the written contract, and thus, could not be used as evidence of the parties’ final agreement. (Cal. U. Com. Code, § 2202 [Terms which are “set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms. . . may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement . . .”].)
With respect to the quantity of goods, Alpha argues that the total number of delivered goods was 7,480 rather than 10,777 as orally promised by D.I.T. The documents do not indicate, however, that the contract was for the sale of 10,777 items. For certain goods, such as digital cameras, the handwritten note does identify a specific number of items to be delivered. For other goods, such as clothes, the note describes the quantity to be delivered in terms of a number of pallets or boxes rather than a number of actual items. Additionally, during their initial meeting, Aroussi represented to Rosensweig that D.I.T. had delivered the merchandise to Alpha in accordance with the parties’ contract and provided him with a copy of the sales order which reflected that the quantities shipped by D.I.T. were consistent with the amounts agreed upon in the signed note. Although Alpha asserts that the parties orally agreed to other more specific terms, Rosensweig was entitled to rely on the documentary evidence and version of events provided by his client prior to filing suit rather than on Alpha’s account of the parties’ alleged oral agreement. Because the information and documents provided to Rosensweig could, if true, support a claim for breach of contract, Alpha failed to demonstrate a probability of proving that Rosensweig commenced the breach of contract action without probable cause.
2. Rosensweig Had Probable Cause To Pursue The Breach Of Contract Action.
We also conclude that Alpha failed to make a prima facie showing that Rosensweig continued to prosecute the breach of contract action without probable cause. Alpha contends that Rosensweig should have dismissed the case as soon as D.I.T. conceded in its discovery responses that there was no written contract between the parties. The discovery responses are somewhat inconsistent with respect to the existence of a written contract. On the one hand, D.I.T. stated in its responses that there were no documents evidencing a business relationship between the parties and no documents that were part of the agreement alleged in the pleadings. On the other hand, D.I.T. denied that it never entered into a written contract with Alpha, affirmatively stated that there was a written agreement between the parties, and produced the November 10, 2003 handwritten note in response to Alpha’s request for the written contract. Therefore, when read as a whole, the discovery responses do not demonstrate that Rosensweig lacked a reasonable belief that there was a written agreement between the parties. Rather, the responses overall reflect that D.I.T. was contending that the parties entered into a written contract and that Alpha breached that contract by stopping payment on the check to D.I.T.
In arguing that D.I.T.’s discovery responses show an absence of probable cause, Alpha also points to Rosensweig’s failure to produce the November 10, 2003 sales order in response to Alpha’s requests. Rosensweig offers no explanation for the withholding of this document in discovery other than to vaguely assert that it “would have been produced.” Nevertheless, for purposes of evaluating probable cause, the sales order does not provide any evidence that would establish a claim for breach of contract was untenable. To the contrary, the sales order offered Rosensweig some corroboration for Aroussi’s claim that D.I.T.’s contract with Alpha was for the sale of “as-is” goods.
Alpha also argues that Rosensweig did not have probable cause to pursue the action once it received the June 8, 2004 letter from Alpha’s counsel setting forth its belief that D.I.T.’s breach of contract claim was baseless. It is true that, in certain circumstances, counsel may provide specific factual information that puts the other party on notice that the action is not tenable and should be investigated further. (Zamos v. Stroud, supra, 32 Cal.4th at pp. 971-972.) However, an attorney is not required to dismiss an action based solely on unsupported statements from opposing counsel that the case has no merit. (Swat-Fame, Inc. v. Goldstein, supra, 101 Cal.App.4th at p. 627 [“We decline to hold that [opposing counsel’s] boilerplate denial of the facts . . . can be said to have put the lawyers on notice of any specific fatal flaw in [their client’s] claim, and thereby negate probable cause. . .”]; Marijanovic v. Gray, York & Duffy (2006) 137 Cal.App.4th 1262, 1272 [“The wholly-unsupported representation by opposing counsel that his client was not liable cannot be sufficient to defeat probable cause.”].) Indeed, “[s]uch letters are commonly exchanged between counsel in almost every civil dispute.” (Swat-Fame, Inc. v. Goldstein, supra, at p. 627.)
In this case, the June 8, 2004 letter from Alpha’s attorney did not contain any verifiable facts which, if true, would totally negate D.I.T.’s breach of contract claim. Instead, the letter stated that there was no enforceable written contract between the parties based on D.I.T.’s discovery responses and the statute of frauds. As discussed above, however, the November 10, 2003 handwritten note arguably does satisfy the statute of frauds and it was produced by D.I.T. in discovery. The letter also stated that a buyer has an absolute right to inspect and reject non-conforming goods. But Alpha’s counsel did not explain in the letter why the goods were non-conforming, and based on the documentary evidence provided to Rosensweig, there remained at least a tenable argument that the delivered goods were conforming because they were sold “as-is.” Because the letter from Alpha’s counsel consisted more of legal argument rather than any specific verifiable facts, it was not sufficient to put Rosensweig on notice that a breach of contract claim was untenable.
Alpha further contends that Rosensweig lacked probable cause to continue pursuing the lawsuit based on his failure to propound any discovery or to research the case. There is some evidence that Rosensweig did not act as diligently as he should have in prosecuting the action. However, the adequacy of an attorney’s research or factual investigation is not relevant to determining probable cause because it improperly “shifts the focus of the probable cause inquiry from the objective tenability of the prior claim to the adequacy of the particular defendant’s performance as an attorney.” (Sheldon Appel Co. v. Albert & Oliker, supra, 47 Cal.3d at p. 883.) Thus, Rosensweig’s alleged failure to take discovery or conduct adequate legal research does not support a showing of probable cause.
Furthermore, the first time that Rosensweig was presented with actual evidence (as opposed to the representations of opposing counsel) that the breach of contract action might not have merit was when Alpha filed its motion for summary judgment and submitted supporting declarations from both Isaac and Benlulu. Around that time, Rosensweig began trying to contact Aroussi who was still out of the country, and he made numerous attempts to reach his client via both telephone and email. After two months of repeatedly trying to communicate with Aroussi without any response, Rosensweig filed a motion to be relieved as counsel based on his client’s failure to cooperate in the prosecution of the case. Rosensweig accordingly took appropriate action to withdraw from the case once he could no longer prosecute the lawsuit on behalf of D.I.T. In light of these facts, we cannot say that Rosensweig wholly ignored the evidence presented in Alpha’s summary judgment motion and continued to pursue the lawsuit notwithstanding that evidence. Because Alpha failed to demonstrate a probability of proving that Rosensweig lacked probable cause to commence or pursue the breach of contract action, the trial court did not err in granting the special motion to strike.
Since Alpha did not establish a probability of prevailing on the probable cause element of its malicious prosecution claim, we need not address the malice element. “If the court determines that there was probable cause to institute the prior action, the malicious prosecution action fails, whether or not there is evidence that the prior suit was maliciously motivated. [Citations.]” (Sheldon Appel Co. v. Albert & Oliker, supra, 47 Cal.3d at p. 875.)
DISPOSITION
The judgment is affirmed. Rosensweig shall recover his costs on appeal.
We concur PERLUSS, P. J.,WOODS, J.