Opinion
B316675 B318245
11-16-2023
REUVEN JUSTIN CYPERS et al., Plaintiffs and Appellants, v. FOX ROTHSCHILD LLP et al., Defendants and Respondents.
Catanzarite Law Corporation, Kenneth J. Catanzarite and Brandon E. Woodward, for Plaintiffs and Appellants. Jenner & Block, Michael P. McNamara and Alexander M. Smith, for Defendants and Respondents.
NOT TO BE PUBLISHED
APPEAL from a judgment and order of the Superior Court of Los Angeles County Super. Ct. No. 21VECV00418, Huey P. Cotton, Jr., Judge.
Catanzarite Law Corporation, Kenneth J. Catanzarite and Brandon E. Woodward, for Plaintiffs and Appellants.
Jenner & Block, Michael P. McNamara and Alexander M. Smith, for Defendants and Respondents.
KIM, J.
I. INTRODUCTION
Reuben Justin Cypers (Cypers) and Residual Income Opportunities, Inc. (RIO) (plaintiffs) brought an action against law firm Fox Rothschild, Fox Rothschild attorney Conrad B. Wilton (defendants), and others for malicious prosecution. The trial court granted defendants' motion to strike plaintiffs' action as a strategic lawsuit against public participation (anti-SLAPP motion) pursuant to Code of Civil Procedure section 425.16 (section 425.16) and awarded defendants their attorney fees. Plaintiffs separately appealed from the judgment (case no. B316675) and the attorney fees order (case no. B318245). We reverse.
The other defendants were Joseph R. Granatelli; law firm Lewitt, Hackman, Shapiro, Marshall & Harlan (Lewitt); Lewitt attorneys David Gurnick and Stephen T. Holzer; Fox Rothschild attorneys Lincoln D. Bandlow and Rom Bar-Nissim; and the Law Offices of Lincoln Bandlow. Plaintiffs later dismissed, without prejudice, the other defendants except for Granatelli.
We granted plaintiffs' unopposed motion to consolidate their appeals.
II. BACKGROUND
A. Complaint
1. Underlying Action
In late 2016, Cypers and Granatelli agreed to co-own and serve as directors and officers of Impact Merchant Solutions, Inc. (Impact). Impact, RIO's agent, was "formed to market and promote merchant services to process credit and debit card transactions related services" to Granatelli's automotive contacts. Granatelli had no experience in the merchant services business so Cypers and RIO agreed to allow him to observe RIO's office operations from January 2017 through August 23, 2017.
In April 2017, Granatelli concluded he would not be successful marketing to automotive prospects and devised an "exit strategy scheme" to take plaintiffs' "business including their merchant accounts, proprietary trade secret information property . . ., files, data, and hundreds of thousands of dollars ...." On April 13, 2017, pursuant to his exit strategy scheme, Granatelli forged Cypers's name on a contract concerning a partnership between Cypers and Granatelli, the formation of Impact, and Granatelli's compensation (putative contract).
On October 16, 2017, Granatelli, represented by Lewitt, Gurnick, and Holzer, filed a "Complaint For Declaratory Relief (Shareholder Derivative Action)" (emphasis omitted) against plaintiffs and others (case no. LC106344) (the underlying action). Attached to the complaint was the putative contract with Cypers's forged signature. Before Lewitt, Gurnick, and Holzer filed the underlying action, plaintiffs had provided them evidence in a different, ongoing action between Granatelli and Cypers (filed on August 24, 2017, case no. LC106120) that was also based on the putative contract, that Cypers's signature on the putative contract was forged.
At some point, Cypers filed a report with the Los Angeles County Sheriff's Department alleging Granatelli's forgery.
On February 22, 2018, Fox Rothschild and Bandlow substituted into the underlying action and case number LC106120 as Granatelli's attorneys. They, Bar-Nissim, and Wilton were aware of the forgery.
On January 28, 2019, Granatelli pleaded no contest to a criminal charge of felony identity theft (Pen. Code, § 530.5, subd. (a)) in connection with Cypers's forged signature on the putative contract.
On December 20, 2019, Granatelli, through Fox Rothschild, Bandlow, Bar-Nissim, and Wilton, filed first amended complaints in the underlying action and case number LC106120. The first amended complaint in the underlying action omitted a copy of the putative contract and falsely alleged the existence of an identical contract with Cypers's actual signature, all originals and copies of which contract Cypers retained.
The first amended complaint in the underlying action is not a part of the record on appeal.
Plaintiffs demurred to the first amended complaint in the underlying action. On September 16, 2020, the trial court held a hearing on plaintiffs' demurrer and took the matter under submission. On September 29, 2020, the court issued a minute order sustaining plaintiffs' demurrer to the first amended complaint without leave to amend.
On November 4, 2020, the court signed an order plaintiffs' counsel prepared sustaining plaintiffs' demurrer to the first amended complaint in the underlying action. The malicious prosecution complaint refers to the November 4, 2020, order and not the September 29, 2020, minute order.
On November 30, 2020, Granatelli filed a notice of appeal. On December 16, 2020, the trial court entered judgment dismissing the underlying action with prejudice. On December 27, 2021, Granatelli filed a notice of settlement and the court of appeal dismissed the appeal and issued the remittitur on March 15, 2022.
Although not alleged in the malicious prosecution complaint, Granatelli appealed from the court's September 29, 2020, minute order sustaining plaintiffs' demurrer without leave to amend in the underlying action. (Case no. B309159.) On our own motion, we take judicial notice of the appellate record in case number B309159. (Evid. Code, §§ 452, subd. (d) & 459, subd. (a).)
2. Malicious Prosecution Action
On March 30, 2021, while the appeal of the underlying action was pending, plaintiffs filed a complaint against defendants for malicious prosecution. They alleged defendants continued to prosecute the underlying action after substituting into the case even though they knew of Granatelli's fraudulent conduct.
B. The Anti-SLAPP Motion
On July 27, 2021, defendants filed an anti-SLAPP motion in response to plaintiffs' malicious prosecution action. They argued the trial court should strike plaintiffs' action as it concerned their protected activity in the underlying action and plaintiffs could not show a probability they would prevail on their action.
On September 14, 2021, the trial court granted defendants' anti-SLAPP motion. The court ruled plaintiffs could not show a favorable termination in the underlying action as it was on appeal and declined to stay plaintiffs' malicious prosecution action pending the outcome of Granatelli's appeal because plaintiffs failed to show defendants acted without probable cause in continuing to prosecute the underlying action. The court found there was "ample evidence to suggest [there was] a contract between" Cypers and Granatelli apart from the forged putative contract and it was "not unreasonable and quite common in representing clients that an attorney would take his own client's word over the representations of the other side." The court did not expressly rule on the malice element of plaintiffs' malicious prosecution action.
III. DISCUSSION
A. The Anti-SLAPP Motion
Plaintiffs contend the trial court erred in granting defendants' anti-SLAPP motion. They argue the court should have stayed or abated their malicious prosecution action rather than rule on the anti-SLAPP motion and, in any event, they met their second prong burden of showing a probability of prevailing on their malicious prosecution action thus defeating the anti-SLAPP motion.
Plaintiffs also contend the court improperly weighed evidence in granting defendants' anti-SLAPP motion and prejudicially erred in failing to rule on their evidentiary objections. Because we hold the court otherwise erred in granting defendants' anti-SLAPP motion, we need not reach these contentions.
1. Stay or Abatement
Relying on Drummond v. Desmarais (2009) 176 Cal.App.4th 439, 458, plaintiffs argue the trial court erred in granting defendants' anti-SLAPP motion rather than staying or abating their malicious prosecution action because they filed their action when they did-during the pendency of Granatelli's appeal of the underlying action-to protect against the running of the one-year statute of limitations for malicious prosecution actions in Code of Civil Procedure section 340.6.
A "cause of action for malicious prosecution accrues upon entry of judgment in the underlying action in the trial court. [Citation.] The statute of limitations begins to run upon accrual and continues to run until the date of filing a notice of appeal. [Citation.] The statute is then tolled during the pendency of the appeal because the plaintiff cannot truthfully plead favorable termination of the prior action, which is an element of the malicious prosecution cause of action. At the conclusion of the appellate process, that is, when the remittitur issues, the statute of limitations recommences to run. [Citation.]" (Roger Cleveland Golf Co., Inc. v. Krane &Smith, APC (2014) 225 Cal.App.4th 660, 668 (Roger Cleveland Golf Co., Inc.), disapproved on another ground in Lee v. Hanley (2015) 61 Cal.4th 1225, 1239.)
Here, the trial court declined to stay or abate the proceedings on the grounds that it believed plaintiffs' malicious prosecution action "fail[ed] on the other elements as well." As we hold below, plaintiffs' action did not fail on those elements. Accordingly, the court's reason for declining to stay or abate plaintiffs' action was error. Moreover, as set forth above, the court of appeal dismissed Granatelli's appeal and issued the remittitur in the underlying action on March 15, 2022. Accordingly, there is now a favorable termination of the underlying action. (See Roger Cleveland Golf Co., Inc., supra, 225 Cal.App.4th at p. 668.)
2. Prong Two-Probability of Prevailing
a. Legal Principles
"A SLAPP suit-a strategic lawsuit against public participation-seeks to chill or punish a party's exercise of constitutional rights to free speech and to petition the government for redress of grievances. [Citation.] The Legislature enacted . . . section 425.16-known as the anti-SLAPP statute-to provide a procedural remedy to dispose of lawsuits that are brought to chill the valid exercise of constitutional rights." (Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1055-1056; § 425.16, subd. (b)(1).) "Resolution of an anti-SLAPP motion involves two steps. First, the defendant must establish that the challenged claim arises from activity protected by section 425.16. [Citation.] If the defendant makes the required showing, the burden shifts to the plaintiff to demonstrate the merit of the claim by establishing a probability of success." (Baral v. Schnitt (2016) 1 Cal.5th 376, 384 (Baral).)
At the first step, "[t]he moving defendant's burden is to demonstrate that the act or acts of which the plaintiff complains were taken 'in furtherance of the [defendant]'s right of petition or free speech under the United States or California Constitution in connection with a public issue,' as defined in the statute. (§ 425.16, subd. (b)(1).)" (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67.)
"To satisfy the second prong, 'a plaintiff responding to an anti-SLAPP motion must "'state[ ] and substantiate[ ] a legally sufficient claim.'" [Citation.] Put another way, the plaintiff "must demonstrate that the complaint is both legally sufficient and supported by a sufficient prima facie showing of facts to sustain a favorable judgment if the evidence submitted by the plaintiff is credited."' (Wilson v. Parker, Covert &Chidester (2002) 28 Cal.4th 811, 821.) 'We consider "the pleadings, and supporting and opposing affidavits . . . upon which the liability or defense is based." (§ 425.16, subd. (b)(2).) However, we neither "weigh credibility [nor] compare the weight of the evidence. Rather, [we] accept as true the evidence favorable to the plaintiff [citation] and evaluate the defendant's evidence only to determine if it has defeated that submitted by the plaintiff as a matter of law."' (Soukup v. Law Offices of Herbert Hafif [(2006)] 39 Cal.4th [260,] 269, fn. 3 [(Soukup)].)" (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 820.) The California Supreme Court has "described this second step as a 'summary-judgmentlike procedure.' [Citation.] . . . '[C]laims with the requisite minimal merit may proceed.' (Navellier v. Sletten (2002) 29 Cal.4th 82, 94 . . . .)" (Baral, supra, 1 Cal.5th at pp. 384-385, fn. omitted.)
We review an order granting or denying a motion to strike under section 425.16 de novo. (Soukup, supra, 39 Cal.4th at p. 269, fn. 3.)
b. Analysis
Plaintiffs rightly concede that an action for malicious prosecution satisfies the first prong. (See Citizens of Humanity, LLC v. Ramirez (2021) 63 Cal.App.5th 117, 127; Area 55, LLC v. Nicholas & Tomasevic, LLP (2021) 61 Cal.App.5th 136, 151.) Accordingly, we turn to prong two-whether plaintiffs demonstrated a probability of prevailing on their malicious prosecution action.
"To satisfy [the] prong-two showing, the plaintiff must present credible evidence that satisfies the standard of proof required by the substantive law of the cause of action the anti-SLAPP motion challenges. Generally, a plaintiff's claims need only have '"minimal merit"' to survive an anti-SLAPP motion." (De Havilland v. FX Networks, LLC (2018) 21 Cal.App.5th 845, 856 (De Havilland).)
"To prevail in a malicious prosecution action under California law, a malicious prosecution plaintiff (the defendant in the underlying action) must show that (1) the plaintiff in the underlying action pursued a claim with subjective malice, (2) the claim was brought without objective probable cause, and (3) the underlying action was terminated on the merits in favor of the defendant." (Lane v. Bell (2018) 20 Cal.App.5th 61, 63-64.)
i. Lack of probable cause
"'Probable cause exists when a lawsuit is based on facts reasonably believed to be true, and all asserted theories are legally tenable under the known facts.' [Citation.] The court must 'determine whether, on the basis of the facts known to the defendant, the institution of the prior action was legally tenable.' [Citation.] We evaluate this question of law under an objective standard, asking whether any reasonable attorney would have thought the claim tenable." (Jay v. Mahaffey (2013) 218 Cal.App.4th 1522, 1540; Cole v. Patricia A. Meyer &Associates, APC (2012) 206 Cal.App.4th 1095, 1106 (Cole).)
"A litigant lacks probable cause '"if he [or she] relies upon facts which he [or she] has no reasonable cause to believe to be true, or if he [or she] seeks recovery upon a legal theory which is untenable under the facts known to him [or her]."'" (Nunez v. Pennisi (2015) 241 Cal.App.4th 861, 875 (Nunez).)
The allegations in plaintiffs' malicious prosecution action and the evidence plaintiffs submitted in opposition to defendants' anti-SLAPP motion contend and show: On October 16, 2017, Granatelli, represented by Lewitt, Gurnick, and Holzer, filed the complaint in the underlying action which attached the putative contract with Cypers's forged signature. Before that action was filed, plaintiffs provided evidence to Granatelli's attorneys that Cypers's signature was forged. On February 22, 2018, Fox Rothschild and Bandlow substituted into the underlying action and case number LC106120 as Granatelli's attorneys. Defendants were aware of the forgery. On January 28, 2019, Granatelli pleaded no contest to a criminal charge of felony identity theft in connection with Cypers's forged signature on the putative contract. Thereafter, on December 20, 2019, Granatelli, through defendants and others, filed first amended complaints in the underlying action and case number LC106120. The first amended complaint in the underlying action omitted a copy of the putative contract and falsely alleged the existence of an identical contract with Cypers's actual signature, claiming Cypers retained all originals and copies of that contract. Accordingly, plaintiffs made a prima facie showing that defendants lacked probable cause in continuing to prosecute the underlying action after learning that the putative contract upon which it was based had been forged.
ii. Malice
"The malice element of malicious prosecution goes to the defendants' subjective intent for instituting the prior case. [Citation.] Malice does not require that the defendants harbor actual ill will toward the plaintiff in the malicious prosecution case, and liability attaches to attitudes that range '"from open hostility to indifference. [Citations.]"' [Citation.] Malice may be inferred from circumstantial evidence, such as the defendants' lack of probable cause, supplemented with proof that the prior case was instituted largely for an improper purpose. [Citation.] This additional proof may consist of evidence that the prior case was knowingly brought without probable cause or was brought to force a settlement unrelated to its merits." (Cole, supra, 206 Cal.App.4th at pp. 1113-1114; accord, Nunez, supra, 241 Cal.App.4th at p. 877.)
We infer malice from defendants' lack of probable cause in continuing to prosecute an action they knew was initiated based on a forged signature. (Cole, supra, 206 Cal.App.4th at pp. 11131114; accord, Nunez, supra, 241 Cal.App.4th at p. 877.) We particularly rely on the allegations in the malicious prosecution action and evidence that: (1) defendants filed the first amended complaint in the underlying action on behalf of a known forger, (2) the forgery went to the subject matter of the first amended complaint-the existence of an agreement between Granatelli and Cypers, and (3) defendants omitted a copy of the putative contract from the first amended complaint and falsely-or at best implausibly-alleged the existence of an identical contract with Cypers's actual signature, all originals and copies of which Cypers retained. These allegations provide the "'"minimal merit"' necessary to survive an anti-SLAPP motion." (De Havilland, supra, 21 Cal.App.5th at p. 856.)
We addressed the favorable termination element of plaintiffs' malicious prosecution action above in our discussion of plaintiffs' contention the trial court erred in granting defendants' anti-SLAPP motion rather than staying or abating their malicious prosecution action.
B. Attorney Fees
Plaintiffs contend the trial court abused its discretion in failing to reduce defendants' excessive attorney fees when it granted defendants' attorney fees motion. Because we held above that the court erred in granting defendants' anti-SLAPP motion, we necessarily reverse the court's award of attorney fees.
IV. DISPOSITION
The judgment and order are reversed. Plaintiffs are awarded their costs on appeal.
We concur: RUBIN, P. J. BAKER, J.