Intelligent SCM v. Roten CA2/5 ( 2022 )

Filed 7/25/22 Intelligent SCM v. Roten CA2/5
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FIVE
INTELLIGENT SCM, LLC, dba B303362
AMERICAN WORLDWIDE
AGENCIES, (Los Angeles County
Super. Ct. No.
Plaintiff and Respondent, BC572581)
v.
RUSSELL W. ROTEN, et al.,
Defendants and Appellants.
APPEAL from a judgment of the Superior Court of Los
Angeles County, Teresa A. Beaudet, Judge. Affirmed in part,
reversed in part, and remanded with directions.
Bird, Marella, Boxer, Wolpert, Nessim, Drooks, Lincenberg
& Rhow, Mark T. Drooks, and Shoshana E. Bannett for
Defendants and Appellants Duane Morris LLP and Russell W.
Roten.
Foley, Bezek, Behle & Curtis and Roger N. Behle, Jr. for
Defendant and Appellant Andrew Scott.
Howard M. Zelener for Plaintiff and Respondent.
Intelligent SCM, LLC (ISCM) sued its former attorneys,
Russell Roten (Roten) and Duane Morris LLP (Duane Morris)
(collectively, the Duane Morris defendants), for breach of
fiduciary duty and breach of the duty of loyalty. In addition,
ISCM sued Andrew Scott (Scott), ICSM’s founder and one of its
former managers, for aiding and abetting the Duane Morris
defendants’ alleged misconduct. Pursuant to the anti-SLAPP
statute (Code Civ. Proc.,1 § 425.16), the Duane Morris defendants
and Scott filed a special motion to strike the entirety of ISCM’s
supplemental complaint against the Duane Morris defendants
and the sole cause of action asserted against Scott in ISCM’s
Fourth Amended Complaint. The trial court denied the motion.
We are asked to decide whether the challenged causes of action
arise from defendants’ exercise of their constitutional rights of
petition and, if so, whether the litigation privilege precludes
showing a probability of success on those claims.
I. BACKGROUND
A. ISCM’s Claims Against Scott and the Duane Morris
Defendants2
ISCM, a freight forwarding company, was originally solely
owned by Scott. In early 2012, in order to rescue the company’s
fortunes, Scott sold membership interests in ISCM to Alex
1
Undesignated statutory references that follow are to the
Code of Civil Procedure.
2
The summary that follows is derived from the allegations in
the operative pleadings and, to some degree, the parties’ evidence
submitted in connection with the joint special motion to strike
(§ 425.16, subd. (b)(2)).
2
Knowles (Knowles) (48 percent), Peter Lamy (Lamy) (10 percent),
and Graham Burford (Burford) (10 percent). The four members
agreed that Scott would be responsible for securing the necessary
legal documentation for the newly-recapitalized ISCM. Scott
retained Roten, who was the managing partner of the Los
Angeles office of Duane Morris, to act as ISCM’s general counsel
and to provide legal services to the company and its four
members. Although Roten had a history of working with Scott,
he did not disclose his prior relationship with Scott to the other
members of ISCM.
Without notice to the other members of the company, and
at Scott’s insistence, Roten structured the company’s revised
operating agreement so that it favored Scott. Approximately two
years after they agreed to take an ownership interest in the
company, the other three members of ISCM confronted Scott over
a series of financial improprieties they discovered in the
company’s books and records. Among other things, the three
other members discovered Scott allowed a company run by his
sister and brother-in-law to incur a debt to ISCM in excess of
$250,000. In addition, they uncovered evidence Scott had
embezzled approximately $133,000 from ISCM.
When Scott was confronted with these accusations, he
retained Roten to help defend against them. Instead of
immediately recusing himself and his firm due to a conflict of
interest between ISCM and Scott, Roten is alleged to have
secretly provided assistance to Scott in his dispute with ISCM
and the other members of the company. Among other things, the
Duane Morris defendants refused to investigate evidence of
Scott’s wrongdoing, accepted unauthorized payments for legal
fees from ISCM’s bank account, and were aware of and agreed
3
with a course of action by Scott that led to freezing of ISCM’s
bank accounts and cancelation of ISCM’s Indirect Air Carrier
certification, which effectively shut down the company’s ability to
operate its airfreight business.
On May 20, 2014, Knowles, acting on behalf of ISCM, filed
a derivative action against Scott (the Embezzlement Action). A
week later, ISCM terminated the Duane Morris defendants as
the company’s general counsel and requested the return of
ISCM’s client file. As alleged, the Duane Morris defendants
refused to withdraw from their representation of ISCM and
continued to act as the company’s counsel until July 2014. They
also refused to turnover ISCM’s client file until ordered to do so
by the judge overseeing the Embezzlement Action and even then
continued to withhold documents from the company. The
Embezzlement Action was ultimately resolved in favor of
Knowles and ISCM with a judgment of more than $550,000 being
entered against Scott.3
In February 2015, nine months after Knowles began the
Embezzlement Action, ISCM sued the Duane Morris defendants
in this action, which we shall refer to as the Malpractice Action;
Scott was later added as a defendant.
In its Fourth Amended Complaint, ISCM asserted various
causes of action against the Duane Morris defendants, including
breach of fiduciary duty and legal malpractice. These claims,
while focused primarily on misconduct in the period between the
3
The judgment against Scott in the Embezzlement Action
was affirmed by another division of this court in an unpublished
decision. (Knowles v. Scott (Feb. 25, 2019, B279562) [nonpub.
opn.].)
4
recapitalization of the company and their dismissal as corporate
counsel, also included allegations about the Duane Morris
misconduct following their dismissal—most significantly the
delay in turning over ISCM’s client file.
The Fourth Amended Complaint asserted only one cause of
action against Scott, an aiding and abetting claim, which was
narrower than the claims asserted against the Duane Morris
defendants. ISCM alleged that Scott, the company’s former chief
operating officer, aided and abetted the Duane Morris defendants
in their misconduct after they had been discharged as the
company’s general counsel. ISCM averred the Duane Morris
defendants “secretly act[ed] as Scott’s other personal attorneys”
in the Embezzlement and Malpractice Actions and “Scott
accepted this assistance knowing it would aid and abet [the
Duane Morris defendants’] efforts to cover up [their]
wrongdoing.” The specific wrongs alleged in the aiding and
abetting cause of action were Scott’s consent to two actions by the
Duane Morris defendants: their refusal to promptly return
ISCM’s client file in the Embezzlement Action (a course of action
the Duane Morris defendants publicly justified on Scott’s
resistance to returning the file) and their preparation of Scott’s
pleadings and other filings in the Embezzlement and Malpractice
Actions.
ISCM later filed a supplemental complaint in this
Malpractice Action against only the Duane Morris defendants,
which amplified the Fourth Amended Complaint’s breach of
fiduciary duty and legal malpractice claims by including
allegations of professional misconduct that occurred after
commencement of the Malpractice Action. The supplemental
complaint asserted four causes of action, each one premised on
5
the Duane Morris defendants’ acquisition of ISCM’s confidential
information while acting as the company’s legal counsel. Each
cause of action alleged a breach of the Duane Morris defendants’
duty of loyalty and their fiduciary duty 4 to their former client in
connection with various legal proceedings.5 In each cause of
action, ISCM asserted the Duane Morris defendants “secretly
acted as Scott’s attorneys[,] secretly represented Scott, secretly
provided advice and strategy to Scott, secretly used and disclosed
confidential knowledge of ISCM’s affairs and ISCM’s confidential
information to benefit Scott, and secretly prepared, and
participated in the preparation of, pleadings filed by Scott.”6 The
4
ISCM alleged the Duane Morris defendants violated the
California State Bar Rules of Professional Conduct, specifically,
former rule 3-310(E) in effect until November 1, 2018, and rule
1.9, effective November 1, 2018. Those rules preclude an
attorney from doing anything which will injuriously affect his or
her former client in any matter in which he or she formerly
represented the client or at any time use against the former
client knowledge or information acquired by virtue of the
previous relationship. (O’Gara Coach Co., LLC v. Ra (2019) 30
Cal.App.5th 1115, 1124.) In addition, ISCM alleged the Duane
Morris defendants violated Business and Professions Code
section 6068, which, among other things, requires an attorney to
“maintain inviolate the confidence, and at every peril to himself
or herself to preserve the secrets, of his or her client.” (Bus. &
Prof. Code, § 6068, subd. (e)(1).)
5
The Duane Morris defendants were not parties to the
Embezzlement Action or either of the cross-actions in the
Malpractice Action.
6
In the supplemental complaint’s fourth cause of action,
ISCM qualified its core allegation slightly, contending the Duane
6
Duane Morris defendants aided Scott in secret, the supplemental
complaint alleged, because they could not do so openly without
first obtaining ISCM’s informed written consent, which they
never sought. Such conduct by the Duane Morris defendants was
“materially adverse to . . . and . . . to the disadvantage of the
interests of ISCM” and caused the company to suffer loss and
damage.
B. Defendants’ Anti-SLAPP Motion
Pursuant to the anti-SLAPP statute, the Duane Morris
defendants and Scott jointly moved to strike the entirety of the
supplemental complaint and the aiding and abetting cause of
action against Scott in the Fourth Amended Complaint. The
moving parties argued their alleged misconduct was protected by
the anti-SLAPP statute because each cause of action was based
on “‘classic petitioning activity,’” namely their conduct in defense
of themselves in the Malpractice Action. They also maintained
ISCM could not show a probability of prevailing because its
claims were barred by, among other things, the litigation
privilege. In support of their motion, the moving parties
submitted exhibits intended to show that the appearance of the
same document control numbers on filings by both the Duane
Morris defendants and by Scott was innocent, i.e., the
submissions by Scott were not ghost-written by the Duane Morris
defendants or their attorneys but wholly authored by Scott’s
attorneys who merely used documents supplied by counsel for the
Duane Morris defendants as “templates.”
Morris defendants secretly “participated in the preparation of all,
or nearly all, pleadings filed by Scott” in the Malpractice Action.
7
ISCM opposed the anti-SLAPP motion. The company
contended the moving parties had not met their threshold burden
under the anti-SLAPP statute because an attorney’s breach of the
duty of loyalty to a former client is not anti-SLAPP protected
activity and because the aiding and abetting of such non-
protected activity cannot be protected either. In addition, ISCM
argued the litigation privilege was inapplicable in an action by a
former client against an attorney for breach of professional
duties. ISCM, however, did not offer any argument about
whether the litigation privilege applied to its claims against
Scott.
In reply, the Duane Morris defendants argued, among
other things, that the conduct of which ISCM complained was not
their conduct, but the conduct of their counsel in the Malpractice
Action, i.e., “every time [ISCM] accuses ‘Duane Morris’ of
‘representing Scott,’ [ISCM] really means that Duane Morris’s
current litigation counsel . . . allegedly assisted Scott’s litigation
counsel . . . .” For his part, Scott emphasized ISCM’s “fail[ure] to
rebut (let alone even address)” his argument that the aiding and
abetting cause of action was barred by the litigation privilege.
C. The Trial Court Denies Defendants’ Anti-SLAPP
Motion
On December 20, 2019, after two days of oral argument, the
trial court adopted its tentative ruling denying defendants’ anti-
SLAPP motion as its final order.
With regard to the supplemental complaint, the court found
the Duane Morris defendants failed to meet their threshold
burden to show ISCM’s causes of actions arose out of their
petitioning conduct. The court reasoned: “While it is true that
8
ISCM alleges conduct that could be fairly characterized as
written or oral statements made in connection with judicial
proceedings, the gravamen or principal thrust of the claims have
to do with the breach of the duty of loyalty owed by the [Duane
Morris defendants] to ISCM. In other words, ISCM claims that it
was injured by virtue of the [Duane Morris defendants’]
disloyalty. That one of the ways that the [Duane Morris
defendants] w[ere] disloyal was the drafting of pleadings on
behalf of an adverse party does not confer anti-SLAPP protection
on the claims.”
As for the aiding and abetting cause of action against Scott,
the trial court found Scott’s “substantial assistance to the [Duane
Morris defendants] in furtherance of their breach of fiduciary
duty [wa]s indistinguishable from liability for the [Duane Morris
defendants’] own breach of fiduciary duty.” Because the court
found the claims in the supplemental complaint did not arise
from protected activity, it correspondingly found “the aiding and
abetting claims against Scott [in the Fourth Amended Complaint]
d[id] not arise from protected activity.”7
II. DISCUSSION
The Duane Morris defendants failed to make a prima facie
showing that the causes of action alleged against them arise out
of protected activity. Although ISCM made reference to
constitutionally-protected petitioning activity in the
supplemental complaint (the ghost-writing of Scott’s filings in the
7
The trial court did not consider (because it was
unnecessary) whether ISCM established a probability of
prevailing on its claims.
9
Embezzlement and Malpractice Actions), the company’s causes of
action do not arise from this activity. Rather, ISCM’s causes of
action arise from breaches of the duty of loyalty by the Duane
Morris defendants, i.e., allegedly acting as Scott’s de facto trial
counsel and disclosing confidential corporate information to the
disadvantage of the company. The ghost-written pleadings and
motions are merely evidence of the Duane Morris defendants’
disloyal conduct. Because ISCM’s claims arose out of breaches of
duty only incidentally connected with litigation activity, the trial
court properly denied the joint motion as to the Duane Morris
defendants.
The same cannot be said, however, for the trial court’s
ruling with respect to Scott. The aiding and abetting cause of
action against him is based on communicative conduct made in
connection with pending litigation—Scott allegedly agreeing to
the plan by the Duane Morris defendants to resist for as long as
possible turning over ISCM’s client file in the Embezzlement
Action and consenting to the ghost-writing of his pleadings and
other court filings by the Duane Morris defendants in both the
Embezzlement and Malpractice Actions. That communicative
conduct is protected under the anti-SLAPP statute because it was
undertaken in furtherance of the right of petition. With Scott
having met his threshold burden, it fell to ISCM to show a
probability of prevailing by showing that its claims were not
barred by the litigation privilege, something it elected not to do.
That accordingly requires reversal of the trial court’s order as to
Scott.
10
A. The Anti-SLAPP Statute
The anti-SLAPP statute was enacted to curtail lawsuits
“brought primarily to chill the valid exercise of the constitutional
rights of freedom of speech and petition . . . .” (§ 425.16, subd.
(a).) “[A] special motion to strike under section 425.16 involves a
two-step process. First, the moving defendant must make a
prima facie showing ‘that the act or acts of which the plaintiff
complains were taken “in furtherance of the [defendant]’s right of
petition or free speech . . . .’” [Citation.]” (City of Montebello v.
Vasquez (2016) 1 Cal.5th 409, 420 (Montebello); accord, Park v.
Board of Trustees of California State University (2017) 2 Cal.5th
1057, 1061) (Park) [“the moving defendant bears the burden of
establishing that the challenged allegations or claims ‘aris[e]
from’ protected activity in which the defendant has engaged”].) If
the defendant carries this burden, the plaintiff must then
demonstrate its claims have at least “‘minimal merit.’” (Park,
supra, at 1061; Baral v. Schnitt (2016) 1 Cal.5th 376, 384-385
(Baral) [discussing the showing that must be made at the second
stage].) “The procedure is meant to prevent abusive SLAPP
suits, while allowing ‘claims with the requisite minimal merit [to]
proceed.’ [Citation.]” (Montebello, supra, 1 Cal.5th at 420.)
Our review of the trial court’s order denying defendants’
joint anti-SLAPP motion is de novo. (Park, supra, 2 Cal.5th at
1067.)
11
B. ISCM’s Causes of Action in the Supplemental
Complaint Against the Duane Morris Defendants Do
Not Arise Out of Protected Activity
1. The anti-SLAPP statute and attorney
malpractice claims
A party filing an anti-SLAPP motion satisfies the first
prong of the anti-SLAPP statute if he or she makes a prima facie
showing that the plaintiff’s cause of action “aris[es] from” an act
the defendant performed in furtherance of the defendant’s right
of petition or free speech. (City of Cotati v. Cashman (2002) 29
Cal.4th 69, 78 (Cotati); accord, Park, supra, 2 Cal.5th at 1062 [“A
claim arises from protected activity when that activity underlies
or forms the basis for the claim”].) “[I]n ruling on an anti-SLAPP
motion, courts should consider the elements of the challenged
claim and what actions by the defendant supply those elements
and consequently form the basis for liability.” (Park, supra, at
1063; accord, Bonni v. St. Joseph Health System (2021) 11 Cal.5th
995, 1010, 1015 (Bonni) [holding the anti-SLAPP analysis begins
with a consideration of the elements of each claim, “the actions
alleged to establish those elements, and whether those actions
are protected”].) In so doing, courts should be “attuned to
and . . . respect the distinction between activities that form the
basis for a claim and those that merely lead to the liability-
creating activity or provide evidentiary support for the claim.”
(Park, supra, at 1064.)
Whether a claim is based on protected activity turns on
“whether the “‘core injury-producing conduct”’ warranting relief
under the cause of action is protected.” (Mission Beverage Co. v.
Pabst Brewing Co., LLC (2017) 15 Cal.App.5th 686, 698 (Mission
Beverage).) “[T]he mere fact an action was filed after protected
12
activity took place does not mean it arose from that activity.”
(Cotati, supra, 29 Cal.4th at 76-77.) Rather, “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.” (Id. at
78.) That is because “[t]he anti-SLAPP statute’s definitional
focus is not the form of the plaintiff’s cause of action but, rather,
the defendant’s activity that gives rise to his or her asserted
liability—and whether that activity constitutes protected speech
or petitioning.” (Navellier v. Sletten (2002) 29 Cal.4th 82, 92;
accord, Park, supra, 2 Cal.5th at 1060 [“[A] claim may be struck
only if the speech or petitioning activity itself is the wrong
complained of . . .”].) “Assertions that are ‘merely incidental’ or
‘collateral’ are not subject to” the anti-SLAPP statute, and
“[a]llegations of protected activity that merely provide context,
without supporting a claim for recovery, cannot be stricken under
the anti-SLAPP statute.” (Baral, supra, 1 Cal.5th at 394; accord,
Bonni, supra, 11 Cal.5th at 1012.)
There are four categories of “protected activity” under the
anti-SLAPP statute. The pertinent categories in this case cover
“any written or oral statement or writing made before . . . a
judicial proceeding” or “in connection with an issue under
consideration or review by a . . . judicial body . . . .”8 (§ 425.16,
subds. (e)(1) & (2).)
8
In their joint anti-SLAPP motion, defendants also claimed
a third category of protected activity was implicated: “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)(4).) Defendants, however, did not support this claim in
the trial court with argument or evidence establishing that their
13
“The anti-SLAPP protection for petitioning activities
applies not only to the filing of lawsuits, but extends to conduct
that relates to such litigation, including statements made in
connection with or in preparation of litigation. [Citation.]
Indeed, courts have adopted ‘a fairly expansive view of what
constitutes litigation-related activities within the scope of section
425.16.’ [Citation.]” (Kolar v. Donahue, McIntosh & Hammerton
(2006) 145 Cal.App.4th 1532, 1537 (Kolar); see also Rusheen v.
Cohen (2006) 37 Cal.4th 1048, 1056 [anti-SLAPP statute protects
“communicative conduct such as the filing, funding, and
prosecution of a civil action,” including such acts when
“committed by attorneys in representing clients in litigation”].)
Although the anti-SLAPP statute provides broad protection
for litigation-related activities, “it does not follow that any claims
associated with those activities are subject to the anti-SLAPP
statute.” (Kolar, supra, 145 Cal.App.4th at 1537; accord, Hylton
v. Frank E. Rogozienski, Inc. (2009) 177 Cal.App.4th 1264, 1275
[client’s action against his or her attorney, whether it is pleaded
as a claim for malpractice, breach of fiduciary duty, or any other
theory of recovery, is not subject to the anti-SLAPP statute
“merely because some of the allegations refer to the attorney’s
actions in court”]; California Back Specialists Medical Group v.
Rand (2008) 160 Cal.App.4th 1032, 1037 [“Not all attorney
conduct in connection with litigation, or in the course of
representing clients, is protected by section 425.16”].)
Legal malpractice claims, for instance, have been routinely
held not to fall within the ambit of the anti-SLAPP statute. As
alleged conduct concerned a public issue and they do not so argue
on appeal.
14
another panel of this court observed, “The authorities have
established that the anti-SLAPP statute does not apply to claims
of attorney malpractice. As stated in one authoritative work,
‘California courts have held that when a claim [by a client
against a lawyer] is based on a breach of the fiduciary duty of
loyalty or negligence, it does not concern a right of petition or free
speech, though those activities arose from the filing, prosecution
of and statements made in the course of the client’s lawsuit. The
reason is that the lawsuit concerns a breach of duty that does not
depend on the exercise of a constitutional right.’ [Citations.]”9
(Chodos v. Cole (2012) 210 Cal.App.4th 692, 702 (Chodos)
9
Among the growing body of case law holding legal
malpractice claims are not protected by the anti-SLAPP statute
are the following decisions which either affirm the denial or
reverse the granting of an anti-SLAPP motion brought by a
defendant lawyer or law firm: Loanvest I, LLC v. Utrecht (2015)
235 Cal.App.4th 496, 505 (Loanvest); Castleman, supra, 216
Cal.App.4th at 494; PrediWave Corp. v. Simpson Thatcher &
Bartlett LLP (2009) 179 Cal.App.4th 1204, 1226-1227
(PrediWave); Freeman v. Schack (2007) 154 Cal.App.4th 719, 733
(Freeman); Kolar, supra, 145 Cal.App.4th at 1535; Benasra v.
Mitchell, Silberberg & Knupp LLP (2004) 123 Cal.App.4th 1179,
1189 (Benasra); see also Sprengel v. Zbylut (2015) 241
Cal.App.4th 140, 158, fn. 9 [affirming denial of anti-SLAPP
motion by defendant attorneys, stating, “We are not aware of any
case that has directly rejected the holdings in Benasra, Freeman,
PrediWave, Castleman and Loanvest. This line of cases extends
back more than a decade and includes published decisions from
five of our six districts. . . . Although the Legislature has
amended section 425.16 and other SLAPP provisions several
times over the past 10 years, it has never signaled any
disagreement with Benasra or its progeny”].)
15
[reversing grant of anti-SLAPP motion because malpractice
claims did not arise out of protected activity]; accord, Castleman
v. Sagaser (2013) 216 Cal.App.4th 481, 491 (Castleman) [“A
growing body of case law holds that actions based on an
attorney’s breach of professional and ethical duties owed to a
client are not SLAPP suits, even though protected litigation
activity features prominently in the factual background”].)
Malpractice actions, in other words, are different than
other types of lawsuits brought against attorneys, such as
malicious prosecution claims, which can fall within the ambit of
the anti-SLAPP statute’s protections. (See, e.g., Chodos, supra,
210 Cal.App.4th at 706 [“Malpractice involves a breach of duty by
neglecting to do an act or doing an act, not the right of petition”];
see also Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th
728, 734-735 [holding malicious prosecution actions necessarily
satisfy the first step of the section 425.16 analysis because they
arise from an underlying lawsuit, or petition to the judicial
branch].)
Loanvest, supra, 235 Cal.App.4th 496, is illustrative. In
that case, the plaintiff, a limited liability company, sued its
former attorney for malpractice, alleging he breached his duty of
loyalty by taking legal positions in prior litigation that were
intended to benefit the company’s previous manager who
controlled the company. (Id. at 499-500.) More specifically, the
complaint alleged the attorney “‘never represented [the
company’s] interests, instead egregiously breaching the duty of
loyalty owed to his purported client’ [by] aid[ing] his ‘true client,’
[the company’s manager], in ‘looting’ [the company] to pay [the
manager’s] obligations.” (Id. at 500.) The appellate court ruled
the claim could not be stricken under the anti-SLAPP statute
16
because “numerous [prior] decisions” had found the statute did
not apply “[w]here . . . a legal malpractice action is brought by an
attorney’s former client, claiming that the attorney breached
fiduciary obligations to the client as the result of a conflict of
interest or other deficiency in the representation of the client.”
(Id. at 504.)
2. The Duane Morris defendants did not carry
their burden to show the supplemental
complaint arises from protected activity
We begin our analysis with the elements of a cause of
action for breach of fiduciary duty/duty of loyalty, which are: “(1)
the existence of a relationship giving rise to a [fiduciary
duty/duty of loyalty]; (2) one or more breaches of that duty; and
(3) damage proximately caused by that breach.” (Huong Que, Inc.
v. Luu (2007) 150 Cal.App.4th 400, 410; accord, Wittenberg v.
Bornstein (2020) 50 Cal.App.5th 303, 312, fn. 7 (Wittenberg).)
In its supplemental complaint, ISCM alleged three
different sources of injury-producing conduct by its former
counsel: (1) they secretly represented Scott against the company
and provided him with advice and strategy; (2) they secretly used
and disclosed confidential knowledge of ISCM’s affairs and
ISCM’s confidential information to benefit Scott in the
Embezzlement and Malpractice Actions; and (3) they secretly
prepared and participated in the preparation of litigation
documents filed by Scott in those proceedings.
It is well-established that attorneys owe a duty of loyalty to
their former clients, a duty which, in this instance, required the
Duane Morris defendants “not do anything which w[ould]
injuriously affect [ISCM] in any matter in which [they] formerly
17
represented [ISCM]” or “at any time use against [ISCM]
knowledge or information acquired by virtue of the previous
relationship.” (Wutchumna Water Co. v. Bailey (1932) 216 Cal.
564, 573-574; accord, Oasis West Realty, LLC v. Goldman (2011)
51 Cal.4th 811, 821 (Oasis West); People ex rel Deukmejian v.
Brown (1981) 29 Cal.3d 150, 155.) Providing secret counsel to
Scott in the Embezzlement and Malpractice Actions and secretly
disclosing confidential corporate information to benefit Scott in
those actions would be inconsistent with the Duane Morris
defendants’ continuing duty of loyalty to ISCM. Such “garden-
variety” attorney malpractice is not a constitutional right
protected by the anti-SLAPP statute. (Jespersen v. Zubiate–
Beauchamp (2003) 114 Cal.App.4th 624, 632; accord, Wittenberg,
supra, 50 Cal.App.5th at 314-315 [holding attorney’s alleged acts
of representing clients with interests adverse to former client and
using former client’s confidential information in the new
representation did not constitute protected activity under anti-
SLAPP statute].)
The third category of alleged wrongdoing—ghost-writing
Scott’s litigation documents—is different than the other two
categories. While on its face it involves petitioning activity that
would be protected, the allegations are more contextual than
substantive. That is to say, unlike the first two categories of
wrongdoing that supply the elements of each cause of action in
the supplemental complaint, the ghost-written pleadings and
motions merely “supply evidence” of how the Duane Morris
defendants breached their duty of loyalty to ISCM by secretly
acting as Scott’s trial counsel and/or providing Scott and his
counsel with confidential corporate information to which they
were not entitled. (Park, supra, 2 Cal.5th at 1064; see also id. at
18
1064-1066 [discussing the “distinction between speech that
provides the basis for liability and speech that provides evidence
of liability”].) Moreover, the breach of their duty to ISCM did not
occur when the Duane Morris defendants began ghost-writing
documents for Scott, but earlier when they decided to forsake
their continuing duty of loyalty to the company in favor of Scott.
(Benasra, supra, 123 Cal.App.4th at 1189 [“the breach occurs not
when the attorney steps into court to represent the new client,
but when he or she abandons the old client”].) This third
category of alleged wrongdoing is accordingly unprotected by the
anti-SLAPP statute. (See, e.g., Loanvest, supra, 235 Cal.App.4th
at 505 [the “fact that the complaint ‘focus[es] specifically on
particular statements or positions taken in connection with
matters under review by a court,’ . . . . does not alter the fact that
the claim is . . . based on the alleged breach of loyalty owed to”
the plaintiff]; Castleman, supra, 216 Cal.App.4th at 494
[“Although protected speech and petitioning are part of the
‘evidentiary landscape’ within which the action arose, the claims
are ultimately based on the allegation that [the attorney]
engaged in conduct inconsistent with the fiduciary obligations he
owed to the respondents”]; Benasra, supra, 123 Cal.App.4th at
1189 [reversing grant of anti-SLAPP motion because plaintiff’s
claims were not based on defendant law firm’s petitioning activity
but on its alleged failure to “maintain loyalty to, and the
confidences of, a client”].)
Peregrine Funding, Inc. v. Sheppard, Mullin, Richter &
Hampton LLP (2005) 133 Cal.App.4th 658 (Peregrine), upon
which the Duane Morris defendants rely, is not to the contrary.
In Peregrine, the plaintiffs were not former clients of the
defendant law firm. Rather, they were third party investors who
19
lost millions in a Ponzi scheme disguised as a successful
mortgage lending business and a bankruptcy trustee. (Id. at 666,
668 & fn. 4.) The Duane Morris defendants’ reliance on Peregrine
is unavailing because, as other courts have recognized, claims by
third parties against a law firm or lawyer are “vastly different”
from claims by a former client. (Kolar, supra, 145 Cal.App.4th at
1540.) In contrast to a former client’s claims against its former
counsel, which encourage more competent petitioning activity
and which are at issue here, claims by a third party against an
attorney for petitioning activity are subject to the anti-SLAPP
statute because such claims “clearly could have a chilling effect”
on petitioning activity. (Ibid.)
Because the Duane Morris defendants failed to make the
requisite threshold showing, ISCM was not required to establish
a probability of prevailing on the merits of its claims and we need
not, and do not, opine on that issue. (PrediWave, supra, 179
Cal.App.4th at 1228; accord, Freeman, supra, 154 Cal.App.4th at
733.)
C. ISCM’s Aiding and Abetting Cause of Action Against
Scott in the Fourth Amended Complaint Does Arise
from Protected Activity
“A defendant is liable for aiding and abetting another in the
commission of an intentional tort, including a breach of fiduciary
duty, if the defendant “‘“knows the other’s conduct constitutes a
breach of duty and gives substantial assistance or encouragement
to the other to so act.”’” [Citation.]” (Nasrawi v. Buck
Consultants LLC (2014) 231 Cal.App.4th 328, 343.) Because
ISCM elected to premise its aiding and abetting cause of action
on conduct that occurred after Scott was removed from his
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leadership position with the company and no longer owed it a
fiduciary duty, the company was required to allege Scott made
“‘“a conscious decision to participate in tortious activity for the
purpose of assisting another in performing a wrongful act.”’
[Citations.]” (American Master Lease LLC v. Idanta Partners,
Ltd. (2014) 225 Cal.App.4th 1451, 1477.)
Because aiding and abetting is a derivative cause of action
(Richard B. LeVine, Inc. v. Higashi (2005) 131 Cal.App.4th 566,
579), ISCM urges us to focus our inquiry on the conduct Scott
aided and abetted, namely the Duane Morris defendants’ breach
of their duties to their former client. But, as discussed ante, such
a focus would be misdirected. We need to focus on the ““‘core
injury-producing conduct”’” (Mission Beverage, supra, 15
Cal.App.5th at 698), i.e., the specific actions allegedly taken by
Scott, to see if they were protected petitioning activity under the
statute. Bergstein v. Stroock & Stroock & Lavan LLP (2015) 236
Cal.App.4th 793 (Bergstein), which involves an aiding and
abetting claim against a party who allegedly helped the plaintiffs’
former lawyer commit malpractice, illustrates the point.
In Bergstein, the plaintiffs first sued their former attorney
Susan Tregub (Tregub) for breach of fiduciary duty and
professional negligence. (Bergstein, supra, 236 Cal.App.4th at
799.) After securing a multimillion dollar judgment against
Tregub, plaintiffs sued lawyers who had represented their
opponents in litigation over various financial transactions,
contending, among other things, the lawyers aided and abetted
Tregub in the breach of her fiduciary duties to the plaintiffs.
(Ibid.) The plaintiffs asserted the defendant lawyers engaged in
tortious conduct when they “‘solicited and
received . . . confidential, privileged, and/or proprietary
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information’” from Tregub and used that information “‘in devising
the legal strategy to be employed [in the litigation] against
[plaintiffs].’” (Ibid.) In addition, plaintiffs alleged the defendant
attorneys “exchanged drafts of pleadings” with Tregub, including
a Master Complaint against plaintiffs. (Id. at 799, 800.) The
defendant attorneys filed a special motion to strike, which the
trial court granted based on its conclusion the aiding and
abetting claim arose from protected litigation activity. (Id. at
797, 802-803.)
On appeal, the plaintiffs claimed the attorney defendants
were not being sued for their actions as litigation counsel or for
any written or oral statement made in a judicial proceeding.
(Bergstein, supra, 236 Cal.App.4th at 811.) Instead, the plaintiffs
argued, the attorney defendants were being sued for the
unprotected conduct of aiding and abetting the breach of Tregub’s
fiduciary duties to the plaintiffs. (Ibid.)
The Court of Appeal rejected plaintiffs’ argument because it
was based on a “mistaken view of the applicable legal principles.”
(Bergstein, supra, 236 Cal.App.4th at 811.) The Bergstein court
explained that aiding and abetting Tregub’s breach of fiduciary
duties was simply the cause of action the plaintiffs asserted, “not
the ‘specific acts of alleged wrongdoing’ that give rise to [the]
cause[ ] of action.” (Ibid.) It observed further that “the factual
basis for defendants’ allegedly tortious activity is centered in
defendants’ role as counsel.” (Ibid.) Because the defendant
lawyers’ “litigation activities are at the core of plaintiffs’
claims . . . . those claims arise from protected activity within the
meaning of the anti-SLAPP statute.” (Id. at 813.)
Here, the core injury-producing conduct as alleged in the
aiding and abetting cause of action was the consent and
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encouragement Scott gave to the Duane Morris defendants in
connection with two legal proceedings. First, Scott agreed the
Duane Morris defendants should resist the return of ISCM’s
client file in the Embezzlement Action and should do so on the
basis that Scott was against such an action. Second, Scott
allowed the Duane Morris defendants to prepare pleadings and
other court filings in both the Embezzlement and Malpractice
Actions. This alleged encouragement of, and consent to, the
conduct of the Duane Morris defendants in the Embezzlement
and Malpractice Actions were communications “made in
connection with an issue under consideration or review by
a . . . judicial body . . . .” (§ 425.16, subd. (e)(2); Bergstein, supra,
236 Cal.App.4th at 811-813 [holding out-of-court communications
on the sharing of confidential information and the drafting of
pleadings constituted activity protected by the anti-SLAPP
statute].)
D. ISCM’s Aiding and Abetting Cause of Action Against
Scott Is Barred by the Litigation Privilege
Having concluded that Scott cleared the prima facie bar for
establishing ISCM’s aiding and abetting cause of action arose
from protected activity, we move to the second stage of anti-
SLAPP analysis. To defeat the anti-SLAPP motion, ISCM bore
the burden of demonstrating a probability of prevailing on the
challenged claims. (Baral, supra, 1 Cal.5th at 384; Oasis West,
supra, 51 Cal.4th at 820.) In evaluating whether a plaintiff has
made that showing, a “court does not weigh evidence or resolve
conflicting factual claims. Its inquiry is limited to whether the
plaintiff has stated a legally sufficient claim and made a prima
facie factual showing sufficient to sustain a favorable judgment.
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It accepts the plaintiff’s evidence as true, and evaluates the
defendant’s showing only to determine if it defeats the plaintiff's
claim as a matter of law.” (Baral, supra, at 384-385; Equilon
Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 63
[plaintiff need only “state[ ] and substantiate[ ] a legally
sufficient claim”].)
A plaintiff cannot establish a probability of prevailing if the
litigation privilege (Civ. Code, § 47, subd. (b)) precludes the
defendant’s liability on the claim. (Flatley v. Mauro (2006) 39
Cal.4th 299, 323.) The litigation privilege “‘applies to any
communication (1) made in judicial or quasi-judicial proceedings;
(2) by litigants or other participants authorized by law; (3) to
achieve the objects of the litigation; and (4) that [has] some
connection or logical relation to the action.’ [Citation.] The
privilege ‘is not limited to statements made during a trial or
other proceedings, but may extend to steps taken prior thereto, or
afterwards.’” (Action Apartment Assn., Inc. v. City of Santa
Monica (2007) 41 Cal.4th 1232, 1241.)
Here, Scott’s alleged misconduct—acceding to the Duane
Morris defendants’ wishes in connection with the return of
ISCM’s client file in the Embezzlement Action and allowing the
Duane Morris defendants to secretly author Scott’s pleadings and
motions in both the Embezzlement and Malpractice Actions—was
plainly communicative in nature. ISCM did not argue in the trial
court that the litigation privilege did not apply as to Scott, nor
does ISCM offer any such defense on appeal. The point is
accordingly waived, and the litigation privilege precludes ISCM
from making a minimal merit showing that would permit
affirmance of the trial court’s order as to Scott. (Bergstein, supra,
236 Cal.App.4th at 814-815 [holding litigation privilege barred
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the plaintiffs’ claim where the plaintiffs did “not identify any of
defendants’ conduct that was not a communication made in a
judicial proceeding (or prior thereto) to achieve the objections of
the litigation”].)
DISPOSITION
The trial court’s order is affirmed as to the Duane Morris
defendants. The trial court’s order is reversed as to Scott and
remanded with directions to grant the anti-SLAPP motion as
applied to him and to hold further proceedings as necessary and
not inconsistent with this opinion. The parties shall bear their
own costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
BAKER, J.
We concur:
RUBIN, P. J.
KIM, J.
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