Opinion
NOT TO BE PUBLISHED
Superior Court County Ct. No. SC043611 of Ventura William Q. Liebmann, Judge
Jeffrey L. Willis for Cross-Defendant and Appellant William K. Pratt.
Manfredi, Levine, Eccles & Miller, Don E. Lanson for Defendant, Cross-Complainant and Respondent Robert A. Sternberg, et al.
No appearance for Plaintiff.
COFFEE, J.
This is an appeal of the trial court's ruling on a special motion to strike a cross-complaint under the anti-SLAPP (strategic lawsuit against public participation) statute. (Code Civ. Proc., § 425.16.) The main action arose from a partnership dispute between attorneys Brenton L. Horner and Robert A. Sternberg, former partners of the law firm of Sternberg, Horner and Associates (SHA). Horner filed an action against Sternberg (respondent) concerning the division of the partnership's assets and liabilities.
All further statutory references are to the Code of Civil Procedure, unless otherwise stated.
Sternberg cross-complained for contract and tort damages. Horner hired attorney William K. Pratt (appellant) to represent him in the main action. Sternberg responded by amending his cross-complaint to add Pratt as a Roe cross-defendant. Pratt filed a special motion to strike the cross-complaint, which the trial court denied. We affirm. Horner is not a party to this appeal.
FACTS
Complaint - Horner v. Sternberg
In 2000, Horner and Sternberg formed the law firm of Sternberg, Horner and Associates (SHA), located in Westlake Village. A dispute arose between them and Horner resigned. In August 2005, Horner filed a complaint against Sternberg for damages and injunctive relief. The action was filed against Sternberg individually, SHA, and Sternberg & Leon, LLP. Horner alleged that Sternberg had collected and retained all receivables of SHA, but failed to provide him with a full accounting or distribution. He also claimed that Sternberg has refused to make payments on a line of credit they both personally guaranteed.
Cross-Complaint – Sternberg v. Horner and Pratt
In November 2005, Sternberg cross-complained against Horner and an associate, Lisa Gallo. Sternberg alleged 17 causes of action, which included breach of fiduciary duty, breach of contract and fraud. Sternberg alleged that Horner wrongfully concealed and diverted profits from the law partnership and engaged in a secret law practice outside SHA.
In January 2006, Horner hired attorney William K. Pratt to represent him. Pratt had served as Horner's co-counsel before and during Horner's tenure with SHA. In June, Sternberg amended his fourth amended cross-complaint to add Pratt as "Roe 1" cross-defendant. It is this amendment to the cross-complaint to which Pratt directed his anti-SLAPP motion.
Motion to Disqualify Pratt
In July 2007, Sternberg moved to disqualify Pratt. Sternberg made the motion on the grounds that Pratt had previously associated as co-counsel with SHA and owed it a fiduciary duty; he would be called as a witness in Horner v. Sternberg; and he had been named as a Roe cross-defendant. Sternberg also alleged that Pratt withheld funds owed to SHA.
The latter allegation forms the basis of this appeal. In the early 1990's, Pratt had served as Horner's co-counsel in a case entitled Rochin v. Pat Johnson Manufacturing Co. (Jan. 30, 2003, B153794) [nonpub.opn.] (Rochin). In 1992, Horner won a jury verdict in favor of Rochin. In 2000, Horner and Sternberg formed SHA. In 2001, SHA became co-counsel with Pratt in the ongoing Rochin litigation. The crux of the disqualification motion is that Pratt misappropriated funds belonging to SHA that were earned in the Rochin matter.
The Rochin litigation began as a personal injury action brought by Joe Rochin when he fell from a ladder manufactured by Pat Johnson Manufacturing Company. Pratt obtained a jury verdict in Rochin's favor in 1992. The litigation continued, and two appeals were heard in the Second District, Division 4. (Rochin v. Pat Johnson Manufacturing Co. (1998) 67 Cal.App.4th 1228, 1232; Rochin v. Pat Johnson Mfg. Co. (Jan. 30, 2003, B153794) [nonpub. opn.].) In August 2007, Judge William Q. Liebmann of the Ventura County Superior Court took judicial notice of several cases pending in the Los Angeles Superior Court concerning the Rochin litigation (minute order dated August 14, 2007).
In March 2003, SHA received a check for $92,628.64, resulting from the Rochin litigation. SHA deposited the funds in its client trust account and issued a check for the entire amount to Pratt. Sternberg alleged that Horner had directed SHA's bookkeeper to transfer all the funds to Pratt, who would make disbursements to third parties and to SHA. However, Pratt has yet to pay SHA its portion of the funds.
Following the filing of Sternberg's disqualification motion, Pratt filed a special motion to strike Sternberg's fourth amended cross-complaint. (§ 425.16.) The trial court stayed further proceedings on the disqualification motion pending the outcome Pratt's appeal of his anti-SLAPP motion. Pratt alleges in his opening brief that Sternberg named him as a cross-defendant in order to disqualify him from representing Horner in the main action and to bring the partnership litigation to a halt. In his respondent's brief, Sternberg alleges that he was uninvolved in the Rochin litigation and the amendment was prompted by his recent discovery that Pratt knowingly received the Rochin funds from SHA.
Following Pratt's appeal of his anti-slapp motion, the trial court requested the parties to file briefs as to the scope of its proposed stay. Two hearings were conducted which included discussion of the stay issue. On appeal, Pratt raises arguments concerning the content of Sternberg's stay brief, but the trial court's decision to stay the related matters is not before us.
Special Motion to Strike
Pratt moved to strike Sternberg's fourth amended cross-complaint on the grounds that all causes of action (1) arose from an act in furtherance of Pratt's right to free speech, and (2) are barred by the litigation privilege (Civ. Code § 47, subd. (b)) as well as the statute of limitations. He requested that the court award him attorney's fees and costs in the amount of $9,100.
At the outset, we note that the allegations in the cross-complaint are only directed against Horner and Lisa Gallo. The cross-complaint was not amended to state causes of action against Pratt. Rather, it was simply amended to add him as a Roe cross-defendant.
Pratt argued in his motion to strike that the sole basis for Sternberg's cross-complaint against him was "the single act of a March 2003 deposit having been made into SHA's trust account . . . ." Pratt claimed that the check was deposited into SHA's trust account over four years before the Roe amendment was filed, and long after any applicable statute of limitations on any cause of action had run.
Pratt contended that the anti-SLAPP statute applied because "all of [his] activities solely arose 'from litigation activity.'" For this reason he claims he is entitled to constitutional protection. He further argued that the litigation privilege immunizes him from liability because his activities arose from communications made during the course of judicial or official proceedings. Pratt reasoned that his failure to distribute a portion of funds deposited to his account in connection with the Rochin litigation is protected by the privilege because the funds were related to that litigation.
Sternberg filed opposition. He incorporated by reference the factual history recited in his motion to disqualify Pratt. Sternberg contended that Pratt had failed to provide a "recognizable communication" that would be subject to the anti-SLAPP statute or protected by the litigation privilege. Sternberg claims that Pratt's "misappropriation of funds" was not in furtherance of any constitutional right and his conduct had no connection with the litigation conducted in the Rochin matters.
The hearing on the anti-SLAPP motion was held on August 14, 2007. The trial court denied Pratt's motion to strike the fourth amended complaint on the ground that Pratt had not shown that the cross-complaint arose from conduct subject to section 425.16. It stated that ". . . Pratt failed to make a prima facie showing that the conduct at issue [the purported misappropriation of funds] arose from the party's exercise of his constitutional rights (i.e., the right of free speech or petition)." (Brackets in original.) The court also concluded that the litigation privilege did not apply because Pratt did not identify any written or oral statements that would constitute a "privileged publication or broadcast." (Civ. Code, § 47, subd. (b).)
DISCUSSION
Anti-Slapp Statute
The anti-SLAPP statute was enacted "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.) When a lawsuit is filed arising from a person's exercise of free speech, the trial court may strike any cause of action arising from any act of that person in furtherance of the person's right of petition for the redress of grievances or free speech. (§ 425.16, subds. (a) & (b)(1).) We review an order granting or denying a motion to strike de novo. (Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 269, fn. 3; Rusheen, at p. 1055.)
Ruling on an anti-SLAPP motion to strike is a two-step process. "First, the court decides whether the defendant has made a threshold showing that the challenged cause of action is one arising from protected activity. . . . If the court finds such a showing has been made, it then determines whether the plaintiff has demonstrated a probability of prevailing on the claim." (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67.) "[T]he statutory phrase 'cause of action . . . arising from' means simply that the defendant's act underlying the plaintiff's cause of action must itself have been an act in furtherance of the right of petition or free speech." (City of Cotati v. Cashman (2002) 29 Cal.4th 69, 78.)
A defendant meets the burden by showing that his conduct falls within one of the four categories described in section 425.16, subdivision (e). (Equilon Enterprises v. Consumer Cause, Inc., supra, 29 Cal.4th at p. 66.) These categories include: "(1) any written or oral statement or writing made before a . . . judicial proceeding, or any other official proceeding authorized by law; [or] (2) any written or oral statement or writing made in connection with an issue under consideration or review by a . . . judicial body . . . ." (§ 425.16, subd. (e).)
The statute further provides that an "'act in furtherance of a person's right of petition or free speech under the Unites States or California Constitution in connection with a public issue' includes: . . . (3) any written or oral statement or writing made in a place open to the public or a public forum in connection with an issue of public interest; (4) or any other conduct in furtherance of the exercise of the constitutional right of petition or the constitutional right of free speech in connection with a public issue or an issue of public interest." (§ 425.16, subd. (e).)
Section 425.16 does not apply where the protected activity is only collateral or incidental to the purpose of the transaction or occurrence underlying the complaint. (California Back Specialists Medical Group v. Rand (2008) 160 Cal.App.4th 1032, 1037 ; Wang v. Wal-Mart Real Estate Business Trust (2007) 153 Cal.App.4th 790, 794.) We addressed this issue in California Back Specialists, a personal injury lawsuit. There, the injured victims were given medical treatment pursuant to liens on their action. After the litigation was resolved, the victims' attorney disbursed the funds, without notifying the medical provider or satisfying the medical liens.
The medical provider filed an action against the attorney, who moved to strike the complaint as a SLAPP suit. The attorney argued that the complaint was subject to a motion to strike because the matter was under review by a judicial body and the California Medical Board. He contended that his conduct was a protected activity because he disbursed the funds as an attorney and was representing his clients in the underlying action. (California Back Specialists Medical Group v. Rand, supra, 160 Cal.App.4th at p. 1037.) We held that section 425.16 was inapplicable because the complaint was based on an underlying controversy between two private parties concerning the validity and satisfaction of the liens. The allegations of the complaint did not arise from the attorney's exercise of his right to petition or right to free speech. (Ibid.)
Pratt argues that his appropriation of funds from the Rochin litigation was a protected activity, because it arose from "litigation activity." We disagree. Pratt's alleged misappropriation of funds involves a private partnership dispute. It is not a protected activity entitled to constitutional protection pursuant to section 425.16. We therefore need not consider the second prong of an anti-SLAPP analysis--the probability of Sternberg's prevailing on his cross-complaint.
Litigation Privilege
The litigation privilege immunizes from liability a person who makes statements in the course of litigation. "A privileged publication or broadcast is one made: . . . In any (1) legislative proceeding, (2) judicial proceeding, (3) in any other official proceeding authorized by law, or (4) in the initiation or course of any other proceeding authorized by law . . . ." (Civ. Code, § 47, subd. (b).)
The privilege is absolute and "'applies to any publication required or permitted by law in the course of a judicial proceeding to achieve the objects of the litigation . . . .'" (Moore v. Conliffe (1994) 7 Cal.4th 634, 641.) The applicability of the privilege turns upon whether the defendant's conduct was communicative or noncommunicative. (Rusheen v. Cohen, supra, 37 Cal.4th at p. 1058.) A communicative act must function as a necessary or useful step in the litigation process and must serve its purposes. (Rothman v. Jackson (1996) 49 Cal.App.4th 1134, 1146.) It must bear "'some relation'" to an anticipated lawsuit to fall within the privilege. (Rusheen v. Cohen, supra, at p. 1057; Blanchard v. DIRECTV, Inc. (2004) 123 Cal.App.4th 903, 919.)
Pratt's alleged misappropriation of funds was a noncommunicative act, thus cannot be considered a statement made in the course of litigation. Moreover, it did not occur during litigation, but at the close of the 1992 Rochin matter. As such, it bore no relation to an anticipated lawsuit and was not subject to the litigation privilege.
It is beyond the scope of our review to consider the parties' arguments concerning the procedural and legal effect of adding Pratt as a Roe cross-defendant. Likewise, we may not address Pratt's argument that a conspiracy was alleged in the disqualification motion. That motion has not yet been ruled upon and is not before us.
The judgment is affirmed. Costs on appeal are awarded to respondent.
We concur: GILBERT, P.J., YEGAN, J.