Opinion
G030973.
10-31-2003
WALTER GREENE, JR., Plaintiff and Respondent, v. WALTER H. ROOT, Defendant and Appellant.
Root & Feinstein and Walter H. Root for Defendant and Appellant. Law Offices of Walter Greene, Jr. and Walter Greene, Jr. for Plaintiff and Respondent.
* * *
There is an old adage that bad things come in threes. Walter H. Root is probably a believer. His self-described "crowning achievement" in obtaining a $2.75 million settlement on behalf of a civil rights plaintiff resulted in no less than three distinct lawsuits against him.
Lawsuit number one: No sooner had Root obtained the multi-million dollar settlement for his client, Farideh Jalali, than she sued him for legal malpractice based upon allegedly incorrect tax advice. (Jalali v. Root (2003) 109 Cal.App.4th 1768.) She was disappointed with Root because she ended up paying taxes on both her recovery and the amount paid Root as his contingency fee.
Lawsuit number two: Root hired his old friend, Walter Greene, Jr., to defend him in Jalalis suit. Greene hired an expert, Mark Lipian, to help the defense at trial. Lipian ran up a big bill ($55,000) eight months before trial. Root had Greene fire Lipian and refused to pay the bill. Lipian sued Root.
Lawsuit number three: Lipian first brought Greene into his collection case against Root by naming Greene as a "Doe" defendant in response to Roots affirmative defense that Greene acted without authority in letting Lipian run up such. Greene then filed an independent action against Root for fraud, claiming that Root duped him into taking the Jalali case by lying to him about certain facts.
This case involves lawsuit number three, between Root and his former defense attorney Greene. Root brought a motion to strike Greenes complaint as a SLAPP suit, which the trial court denied. (See Code Civ. Proc., § 425.16.)
We conclude that the motion should have been granted. Communications to your attorney in respect to exercising your right to defend yourself in court are within your constitutional right to petition the government for redress of grievances. And, because Greenes whole case depends entirely on the admissibility into evidence of statements protected by the attorney-client privilege — with Root, not Greene as the holder of the privilege — Greene cannot possibly prevail at trial unless Root waives or has waived the privilege he holds. It is clear he wont, and as we show below, he hasnt. The order of the trial court is therefore reversed with directions to enter judgment in favor of Root.
I. FACTS
Walter H. Root represented Farideh Jalali in a suit against her former employer for racial discrimination and sexual harassment. Against the odds, Root succeeded in convincing the jury to award Jalali compensatory damages of $ 750,000 and to find the necessary malice, fraud or oppression to justify punitive damages. Jalali and her employer thereafter agreed to a settlement of $2.75 million for all claims, conditioned on confidentiality.
Root later advised Greene to note that this was the "crowning achievement" of his career. His crowning achievement came at a heavy price, however. As noted, three lawsuits against Root sprouted out of the underlying case. Jalali sued him for legal malpractice, his expert witness in the malpractice action sued him for unpaid fees, and Greene himself, his attorney in the malpractice action, sued him for fraud.
The legal malpractice action reached us on appeal not long ago. In Jalali v. Root, supra, 109 Cal.App.4th 1768, we determined that Jalali failed to show any damages. More specifically, she failed to show that a recovery larger than the one she already had received was possible.
In Jalali we noted that the plaintiffs case was hardly overwhelming. (See Jalali, supra, 109 Cal.App.4th at pp. 1772-1773 (noting cases with far more egregious facts).) The record in this case vindicates that observation. Greene attached to his Statement in Support of Motion for Summary Judgment a letter Root had sent him disclosing just how weak Jalalis case against her employer actually was. (Roots point was that Jalali would not be able to show that she could have obtained more than what Root had already obtained for her.) Root told his then-malpractice defense attorney: "Among the key facts we will need to elicit are that (a) she never heard or witnessed any racial slurs (and did not know about them until depositions were taken almost a year after her termination), (b) only one person ever uttered them, (c) only one was ever directed toward her, on a single occasion . . ., (d) likewise, she was never physically touched, and only one sexual comment was made to her . . ., (e) she never came close to meeting her sales quota . . ., (f) she has never demonstrated an ability to sell or made more money in any other job, (g) she was never fired, and gave [her employer] only one week to comply with her demands (during the Christmas holiday season when most of the senior management officials were out-of-town at company gatherings) before claiming she was constructively terminated, (h) she admitted lying to [her employer] about a non-existent `minor operation to avoid going to work after she had been placed on probation and ordered to met with [her supervisor] on a daily basis, and (i) her credibility was impeached on the sequence of events surrounding her resignation."
Walter Greene, Jr., a former close friend of Root, represented him at the trial level of the malpractice action. Given their close friendship, Greene agreed to take the case at a reduced hourly rate. He further agreed to delay his retirement long enough to represent Root in the case to its completion.
Root agreed to the retention of three experts for the case, one of whom was Dr. Mark Lipian, a psychiatric expert highly recommended by Greene. Lipian had impressed Greene in a previous trial. But not long after Lipian had been retained and still eight months before trial, his fees had ballooned to roughly $55,000. Lipian billed for over ninety hours of work at a rate of $500 an hour. Root had Greene fire Lipian immediately. Soon after, Lipian brought a collection action against Root for the amount still due.
By contrast, Greenes services cost close to $100,000.00 for the entire case.
Although Greene initially tried to mediate between Root and Lipian, he quickly removed himself from the billing dispute, informing Root in a letter that it was up to him and Lipian to "slug it out" themselves. However, Greene was promptly pulled back into the fray when Lipian named Greene as a "Doe" defendant due to Roots affirmative defense that Greene was acting on his own. Greene filed a motion for summary judgment to Lipians complaint. In this motion he argued that he was entitled to summary judgment because undisputed evidence showed that Greene was only acting on Roots behalf and within his scope as Roots attorney. Greene additionally argued that the suit with Lipian only existed because Root had caused himself to lose the underlying suit against Jalali. Root allegedly lost the suit because of his allegedly wrongful use of his brother-in-laws services (his brother-in-law was a suspended attorney) and his attempt to defend certain fees (like hotel bills) he had charged Jalali. Greene succeeded in the motion and, for that moment at least, extricated himself from the embroilment.
By the time of the appeal of the malpractice verdict against him, Root had apparently learned his lesson. He made no attempt to defend the disputed fees, and so they did not figure in the Jalali case.
But just as general contractors dislike being the sole defendants in construction defect cases, Root was not about to face Lipians fees alone. Root filed a cross-complaint against Greene, which effectively brought Greene back into the action. Root alleged that Greene had a duty to ensure that excessive costs or expenditures were not incurred. Root asserted that Greene had a duty not to allow Lipian to expand the scope of his assignment beyond that which was reasonably necessary. According to Root, by not stopping Lipian from allegedly overbilling, Greene breached that duty.
The allegation did not go over very well with Greene. Literally just days before Lipian v. Root was to go to trial, Greene and Root squared off in a battle of cross-complaints. First Root sought leave to amend his cross-complaint against Greene, then Greene attempted to file his own cross-complaint against Root. Roots amended cross-complaint would have expanded his original claim for indemnity into one seeking affirmative relief, including a disgorgement of fees paid to Greene. Root accompanied his motion to file an amended cross-complaint with a motion to quash against Greene. However, once the trial court indicated that it intended to deny Roots motion to quash, Root withdrew his amended cross-complaint. The trial court then denied, albeit without prejudice, Greenes motion to file a cross-complaint and re-open discovery. Later that same day, Greene simply changed the caption on his cross-complaint to file it as an original action. It is that complaint that is the subject of this appeal.
The edit job was hasty. Residual references to "cross-complainant" still remained.
Greenes complaint alleges causes of action for the breach of the covenant of good faith and fair dealing, fraud by concealment, and intentional and negligent misrepresentation, all arising from information Greene acquired in confidence as Roots attorney in the trial level of Jalali v. Root. Greene alleges that Root did not disclose to him that (1) Roots brother-in-law, Guido Smith, worked on Jalalis file although at the time he was a suspended attorney (later disbarred), and that (2) Root and three other witnesses were untruthful about certain facts related to the settlement discussions in the original case, i.e., whether or not Jalali was in Roots office at the time settlement was discussed. Greene contends that had he known this information, he would not have agreed to represent Root in this case, or, at the very least, would not have given Root an $80.00 an hour discount.
Root filed a motion to strike Greenes complaint pursuant to the anti-SLAPP statute. His motion was denied.
Root accompanied his motion to strike with a motion to declare Greene a vexatious litigant. In support of this latter motion, Root alleged that, in the instant litigation, Greene had threatened to reveal privileged attorney-client communications, violated a protective order that required him to file documents containing privileged information under seal, and threatened to set the deposition of Roots opposing counsel in the appeal of the malpractice action. As to the threatened deposition, Greene sent a letter to Root on the day he purportedly knew Root would be leaving for a three week vacation to Europe, suggesting that he would serve a deposition notice in the next fifteen days unless Root could suggest a reason why he should do otherwise. Greene also issued trial subpoenas to Roots wife and brother-in-law. Additionally, according to Root, Greene refused to appear for his deposition, disobeyed a court order that he not initiate actions until he completed his deposition, and disobeyed a court order that he pay Root a monetary sanction.
II. DISCUSSION
A. Raising a New Argument on Appeal
As we noted in Commonwealth Energy Corp. v. Investor Data Exchange, Inc. (2003) 110 Cal.App.4th 26, 31, "The consideration of anti-SLAPP motions is a two-step process. (Navellier v. Sletten (2002) 29 Cal.4th 82, 88, 124 Cal.Rptr.2d 530, 52 P.3d 703.) The first step is to determine whether `the defendant has made a threshold showing that the challenged cause of action is one arising from protected activity. (Ibid.) Only if such a showing is made should the court proceed on to the second step, which is to determine whether the plaintiff has demonstrated a probability of prevailing on the claim. (Ibid.; Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67, 124 Cal.Rptr.2d 507, 52 P.3d 685.)"
When Root filed a motion to strike Greenes complaint pursuant to the anti-SLAPP statute, his argument as to the first prong was that Greenes case against him arose from his filing the cross-complaint. He lost on that one, with the trial court explaining that "[i]f the court were to follow Roots reasoning, CCP 425.16 might apply every time a cross complaint is filed against a plaintiff."
In light of the Supreme Courts clarification that "arising from" cannot be construed as meaning "in response to" (City of Cotati v. Cashman (2002) 29 Cal.4th 69, 77), the trial court most likely came to the correct conclusion based upon the argument Root put forward at the time. City of Cotati makes clear that "the statutory phrase `cause of action . . . arising from means simply that the defendants act underlying plaintiffs cause of action must itself have been an act in furtherance of the right of petition or free speech." (Id. at p. 78, original italics.)
Now, on appeal, Root has revised his prong-one argument. He now asserts that Greenes complaint arose from Roots right of petition in disclosing to Greene communications in connection with hiring Greene to defend him in the Jalali v. Root action, as distinct from merely filing a cross-complaint. Under this theory, because Greenes complaint is substantively based upon the exercise of Roots petitioning rights it satisfies the first prong of the statute.
Although a party may not normally raise a new contention on appeal, exceptions include where a new point of law is decided while the appeal is pending and where a new theory presents a question of law based on the undisputed facts of the record. (In re Marriage of Moschetta (1994) 25 Cal.App.4th 1218, 1227.)
In this case, both exceptions apply. As to the first exception, several months after Roots original motion to strike was denied, our Supreme Court clarified what a defendant bringing an anti-SLAPP motion must show. (Equilon Enterprises, supra, 29 Cal.4th 53; City of Cotati, supra, 29 Cal.4th 69; Navellier v. Sletten (2002) 29 Cal.4th 82.) Root contends that his argument changed with the understanding that the new focus under the anti-SLAPP statute was whether the cause of action itself is based on an act in furtherance of the defendants right of petition or free speech rather than what triggered the cause of action or whether the cause of action was made with the intent of chilling the defendants right of petition or free speech. As to the second exception, because the question of law here is based upon the same undisputed facts, entertaining Roots new twist on undisputed facts does no prejudice to Greene. Accordingly, we proceed to evaluate Roots new theory on appeal.
Root has filed an outstanding motion to take judicial notice of these three decisions. It is granted. However, we should add no motion should be necessary to prompt an intermediate appellate court to read recent decisions of the Supreme Court. (One wonders — could we have legitimately denied Roots motion and then just ignored the Equilon Enterprises, City of Cotati, and Navellier opinions?)
B. The "Arising From" Prong
Having said all that to demonstrate that the first prong can be determined, the actual analysis is really quite simple. The anti-SLAPP statute "requires every defendant seeking its protection to demonstrate that the subject cause of action is in fact one `arising from the defendants protected speech or petitioning activity." (Equilon Enterprises, supra, 29 Cal.4th at p. 66.) A review of Greenes complaint makes clear that his case is based upon Roots retention of Greene under allegedly false pretenses. Communications to Greene from Root in that context are clearly part of the right of petition. "`[J]ust as communications preparatory to or in anticipation of the bringing of an action or other official proceeding are within the protection of the litigation privilege . . . , such statements are equally entitled to the benefits of section 425.16." (Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th 1106, 1115, emphasis added.)
C. The "Probability of Prevailing" Prong
To establish the requisite probability of prevailing under the anti-SLAPP statute, thus defeating the motion to strike, Greene need only state and substantiate a legally sufficient claim. (Navellier, supra, 29 Cal.4th 82, 88.) The process used to determine the merits of an anti-SLAPP motion is similar to that used toward summary judgment motions. (Mattel, Inc. v. Luce, Forward, Hamilton & Scripps (2002) 99 Cal.App.4th 1179, 1188 ["The evidence presented must be admissible [citation] and the trial court does not weigh the evidence."].)
It is undisputed that Root paid every dime of the roughly $100,000 in legal fees that Greene charged him pursuant to their contractual agreement. "No person can recover a greater amount in damages for the breach of an obligation, than he could have gained by the full performance thereof on both sides." (Civ. Code, § 3358.) So it is obvious that Greene has no case for breach of contract.
Fraud is a different matter. Greene alleges he has been harmed by taking the case in the first place at the price he quoted: At the very least he would have charged Root more per hour. At the most he might not have taken the case at all and devoted himself to more profitable endeavors. So we will assume for the moment that Greenes fraud case might be a winner if he could convince a trier of fact of Roots perfidy.
According to Greenes complaint: "Had Greene known the true facts, he would not have accepted Roots employment, or, if he had accepted Roots employment, it would not have been at a rate of $80.00 less than his normal hourly rate." As awkward as it sounds to charge "truthful" clients one rate and "dishonest" clients a higher rate, we will take Greene at his word that he charges his "dishonest" clients more. Thus, it is conceivable that, as a result of alleged fraud, Greene may have sustained damages in the amount he otherwise would have charged Root for his services. (Then again, he would also have to show that Root would have accepted Greenes services at a rate higher than what he paid here or that representing Root meant an opportunity cost for an equivalent number of hours at the regular rate.)
The problem is, Greene will not be able to get that evidence in front of the trier of fact in the first place. A review of his complaint shows that his claims are based entirely upon communications within the attorney-client relationship, and it is Root, not Greene, who holds the privilege here.
Root obviously isnt going to waive the privilege; he has spent considerable ink trying to protect it. The case boils down to whether he has already waived it.
No. We may first dispense with the notion that Root waived the privilege by the mere fact that Root filed a cross-complaint against Greene in Lipians collection action. That doesnt fly, because "communications do not become discoverable simply because they are related to issues raised in the litigation." (Transamerica Title Ins. Co. v. Superior Court (1987) 188 Cal.App.3d 1047, 1052-1053.)
The main argument for waiver is that Root made an issue of Greenes "integrity, good faith, authority or performance of his duties" in his opposition to Greenes summary judgment motion in Lipians collection case. Greene relies on language in Carlson, Collins, Gordon & Bold v. Banducci (1967) 257 Cal.App.2d 212, which he reads for the idea that if an attorneys good faith is impugned by his or her client, the client has waived the privilege. ("[W]hen, in litigation between an attorney and his client, an attorneys integrity, good faith, authority, or performance of his duties is questioned, the attorney is permitted to meet this issue with testimony as to communications between himself and his client." (Id. at p. 228.))
Not quite. Carlson does not stand for anything so blanket. In Carlson, the plaintiff law firm represented the defendants in a will contest. A dispute arose as to the amount of attorney fees the defendants agreed to pay. This subsequently led to a conference between the law firm and the defendants where one of the defendants allegedly agreed to higher fees. Evidence was later admitted at trial to demonstrate that there was no undue influence on the part of the law firm to compel the defendant to agree to the higher fees. The defendants argued that this evidence should not have been admitted because it fell under the attorney-client privilege. However, because the defendants raised the issue of undue influence in their pleadings, the court held that the attorney-client privilege was waived.
Greene construes Carlson to mean that any criticism of an attorneys performance will waive the attorney-client privilege as to all communications. Thus, Root allegedly waived the privilege when he stated: "Greenes motion is precisely the type of `loose cannon lawyering by Greene that got Root into his current predicament"; or "This was the lawsuit, Jalali v. Root, in which I was represented by Cross Defendant Walter Greene Jr., and which Greene somehow managed to lose."
It didnt. Despite the broad language used in Carlson, the case does little more than demonstrate that an attorney is permitted to meet an issue brought forth in court by a former client with evidence that would otherwise be protected.
Statements like "my attorney screwed up" obviously cannot waive the attorney-client privilege.
Evidence Code section 912, subdivision (a) provides that a waiver of the attorney-client relationship occurs "with respect to a communication protected by the privilege if any holder of the privilege, without coercion, has disclosed a significant part of the communication or has consented to disclosure made by anyone." (Emphasis added.) Here, there are two reasons to conclude that there was no waiver of confidentiality in Roots opposition papers. Those reasons correspond to the two elements inherent in the statute, significance and consent.
As to significance, all the statements made by Root in his opposition papers but one concerned the Jalali case generally and could have been available to any kibitzer in the Jalali case who listened to what was said in open court and read the public file. The exception was a disclosure that Root "pleaded with Greene, without success, to introduce a writing" concerning certain costs for which Jalali had agreed to reimburse Root. Since those costs were so unimportant to the Jalali malpractice case that they didnt even merit mention in our opinion in the case (the costs were not an issue on appeal), they obviously were not significant to the defense of that action.
For example: "[Jalalis] lawsuit faced three major obstacles: (1) How to overcome the fact that my unassailable tax advice had been personally witnessed and seconded by Fred Ashley, another attorney, on the day the settlement offer was received in my office, and (2) The obvious one—how to prove she suffered actual damage given the spectacular result achieved in the underlying litigation"; and "My brother-in-law had not been disbarred at the time he performed legal services in Jalalis behalf, which explains why the Court granted Greenes Motion in Limine to prohibit reference to the fact that he was later disbarred. His paralegal fees were recoverable against Jalalis employer in the underlying litigation under Government Code Section 12965(b) and were therefore among the items Jalali was compensated for by her settlement. This is an argument Greene failed to make in my behalf."
As to consent, Root did everything that could reasonably have been expected to keep whatever confidences that had been disclosed in his opposition papers secret. Those papers were filed under seal and marked "CONFIDENTIAL." He successfully sought a protective order to keep the documents confidential as well. He also wrote numerous letters pleading with Greene not to disclose privileged information. "`The privilege of confidential communication between client and attorney should be regarded as sacred. It is not to be whittled away by means of specious argument that it has been waived. Least of all should the courts seize upon slight and equivocal circumstances as a technical reason for destroying the privilege." (Lohman v. Superior Court (1978) 81 Cal.App.3d 90, 94.)
The lack of consent is further underscored by the defensive nature of Roots disclosures. In his summary judgment motion, Greene argued that but for Roots alleged dishonesty regarding his brother-in-law and Jalali, Root would have won Jalali v. Root at the trial level and, consequentially, Jalali would be the one paying Lipians (at least facially) exorbitant fees, so Root brought the entire expert fee mess upon himself. In fact, Greene attached to his motion about a dozen letters between himself and Root that were written while the Jalali case was pending. Greene had thus let the cat out of the bag, and Root was merely trying to herd it back in. To say that Roots (insignificant) defensive disclosures here waived the privilege would allow attorneys to bully their clients into waiving the privilege by first violating it themselves.
D. Sanctions
Greene also filed a motion for sanctions, contending that Roots appeal is frivolous. This motion is emblematic of the grudge match between the two attorneys and former friends. Tooth for tooth and all that. As Roots appeal is meritorious, Greenes motion for sanctions obviously must be denied. We need only add that the feud should stop here. This court has made known its displeasure with endlessly reciprocal sanction motions. (In re Marriage of Koester (1999) 73 Cal.App.4th 1032, 1041 ["Life at the bar is already too filled with litigious horrors to add to them a self-feeding spiral of sanction requests . . . ."].)
III. DISPOSITION
The judgment is reversed with directions to the trial court to enter a new order granting the SLAPP motion. Root is entitled to costs of appeal.
A housekeeping matter: As in Jalali, portions of the record indicating the nature of the original case between Jalali and her employer made it into the appellate record before this court. Confidentiality was an important term of the settlement between the two parties. Rather than risk issues arising in the future as to whether the parties conduct in this action violated that confidentiality agreement, we will take the prophylactic step of ordering the record sealed pending further order of this court, application showing good cause, or, order from a higher court.
WE CONCUR, RYLAARSDAM, J. and OLEARY, J.