Opinion
B154225.
10-1-2003
BRIAN McMAHON, Plaintiff and Respondent, v. DAVID WEST et al., Defendants and Appellants.
Law Offices of Manuel S. Klausner and Manuel S. Klausner; Patrick J. Manshardt, in pro. per., and for Defendants and Appellants. No appearance for Plaintiff and Respondent.
David West, Manuel Klausner and Patrick Manshardt (collectively "individual defendants") appeal from the trial courts orders denying their special motions to strike under Code of Civil Procedure section 425.16. We reverse.
All statutory references are to the Code of Civil Procedure unless otherwise specified.
FACTUAL AND PROCEDURAL BACKGROUND
The Individual Rights Foundation (IRF) is a public interest law project of the Center for the Study of Popular Culture (Center), a public benefit corporation organized under section 501(c)(3) of the Internal Revenue Code. The mission of the Center is "to strengthen the cultural foundations of a free society." The purpose of the IRF is to further the First Amendment rights of college administrators and government officials. The IRF refers potential clients to attorneys in its national network of lawyers who volunteer their time for the organization and then, if legal action is pursued, pays litigation expenses and provides media support and fundraising efforts.
Brian McMahon contacted the IRF because he believed he had been terminated from his position at El Camino Community College in retaliation for reporting that the college was enrolling "phantom students" to receive additional funding. McMahon had filed suit in state court against El Camino in propria persona and wanted the IRF to sponsor his case. The IRF agreed and referred the case to Manshardt, an attorney affiliated with the IRF, who undertook representation of McMahon in the pending state court action and also filed a federal civil rights action against the college on McMahons behalf. McMahon signed an engagement letter prepared by Manshardt, which outlined the terms of their attorney-client relationship. Klausner, another lawyer affiliated with the IRF, associated in as counsel for McMahon; and a similar engagement letter was signed by Klausner and McMahon.
McMahons federal court action was dismissed on statute of limitations grounds. After a bench trial in the state court action, the trial court ruled against McMahon, finding his allegations were not credible.
Subsequently, McMahon contacted Klausner and asserted that he and Manshardt had failed to disclose that West, another lawyer affiliated with the IRF, was a partner in the law firm of Gibson, Dunn & Crutcher, which had represented El Camino, and that, as a result, Manshardt and Klausner had a conflict of interest in representing McMahon. Klausner responded that Wests role with the IRF had been limited to providing tax advice, serving on the advisory board and reviewing proposed cases for IRF to support and that West had received no communication on, or been involved in, McMahons case other than general descriptions contained in memoranda reporting on all IRF matters. McMahon also called West to discuss his conflict of interest allegations. West explained that neither he nor Gibson, Dunn had represented McMahon or El Camino in any matters related to McMahons claims against the college, that West personally had never represented El Camino and that other Gibson, Dunn lawyers had represented El Camino only on matters completely unrelated to McMahons claims. West later confirmed no Gibson, Dunn lawyer had performed legal services for El Camino for more than 16 months before McMahon had engaged Manshardt as his counsel.
At the time McMahon asserted his conflict of interest claim, the due date was approaching for a petition for writ of certiorari in McMahons federal action. Klausner informed McMahon that, based on his assertions of a conflict of interest, neither Klausner nor Manshardt could continue to represent McMahon without a waiver of the alleged conflict for the limited purpose of filing the petition. McMahon did not waive the conflict, and the petition was never filed.
McMahon filed suit against the Center, David Horowitz, the president of the Center, the IRF, Klausner, Manshardt and West, alleging causes of action for: (1) accounting against the Center, IRF and Horowitz to determine the amount of funds that were collected on McMahons behalf yet improperly diverted for other purposes; (2) conversion against Horowitz on the ground he personally directed the improper use of funds collected on McMahons behalf; (3) fraud against the Center, IRF and Horowitz on the grounds they falsely represented the IRF as a law firm, entered an illegal side agreement to split fees with Manshardt and Klausner and intended to convert money raised for McMahons benefit; (4) fraud and breach of fiduciary duty against West, Klausner and Manshardt on the grounds they improperly represented McMahon and El Camino simultaneously without disclosing the conflict to McMahon, they intentionally concealed from McMahon the IRF was found to have been practicing law without a license, they raised funds under false pretenses, Klausner and Manshardt secretly entered an illegal side agreement to split fees with Horowitz, and Klausner and Manshardt failed to argue equitable tolling to avoid dismissal of McMahons federal suit on statute of limitations grounds, file the petition for writ of certiorari in his federal case unless he waived the conflict of interest, timely request leave to amend the complaint in his state court action, adequately prepare for and conduct the trial in his state court action and preserve a record for appeal; (5) conspiracy to commit fraud against all defendants; (6) breach of the covenant of good faith and fair dealing against all defendants; (7) conspiracy to commit breach of fiduciary duty against all defendants; and (8) intentional infliction of emotional distress against all defendants on the ground that Klausner and Manshardt threatened to withhold the filing of the petition for writ of certiorari unless McMahon waived the conflict of interest created when West simultaneously represented both McMahon and El Camino.
Neither the Center nor Horowitz moved to strike the complaint under section 425.16 and, therefore, is not a party to this appeal. The record does not reveal the status of the litigation with respect to those parties.
Two special motions to strike McMahons complaint as a SLAPP (strategic lawsuit against public participation) suit under section 425.16 were filed, one by West and one by Klausner and Manshardt, arguing McMahons allegations arise from their exercise of their rights to petition and free speech. The trial court (Judge Richard C. Hubbell) denied the motions on August 29, 2001 on the ground the threshold showing required for application of the anti-SLAPP statute had not been made because McMahons allegations of misappropriating and converting funds, unlawful fee splitting and undertaking conflicting representation did not involve conduct in furtherance of First Amendment rights.
The IRF filed a section 170.6 peremptory challenge to Judge Hubbell, which was accepted, and the case was transferred to Judge Robert L. Hess. The IRF then filed its own special motion to strike, and West, Klausner and Manshardt filed a renewed special motion to strike. Judge Hess denied the IRFs motion on October 19, 2001 and the individual defendants renewed motion on October 26, 2001. As to both motions, the court again found the threshold showing of conduct in furtherance of the right of free speech or petition had not been satisfied.
After the anti-SLAPP motions were denied, defendants moved for dismissal of the case under section 128.7. The trial court granted the motion as to West and the IRF but gave McMahon leave to file an amended complaint for attorney malpractice against Klausner and Manshardt. McMahon appealed from the dismissal order. That appeal is pending before our court. (B159873.) After McMahon filed two amended complaints against Klausner and Manshardt, the trial court sustained without leave to amend a demurrer to McMahons second amended complaint. McMahon again appealed. (B165875.) That appeal was dismissed for McMahons failure to file a case information statement. (Cal. Rules of Court, rule 1(f).) Although McMahons case has been disposed of in the trial court, this appeal is not moot because a party who successfully brings an anti-SLAPP motion is entitled to attorney fees and costs. (§ 425.16, subd. (c); see White v. Lieberman (2002) 103 Cal.App.4th 210, 220.)
The individual defendants appealed from the trial courts orders of August 29, 2001 and October 26, 2001. (§ 425.16, subd. (j).) Although the appellants opening brief also addresses the October 19, 2001 order denying the IRFs motion, no separate notice of appeal was filed by the IRF, and the October 19, 2001 order is not identified in the notice filed by the individual defendants. Accordingly, the propriety of the trial courts ruling as to the IRFs motion is not before us. (DeZerega v. Meggs (2000) 83 Cal.App.4th 28, 43 ["`[W]here several judgments and/or orders occurring close in time are separately appealable (e.g., judgment and order awarding attorney fees), each appealable judgment and order must be expressly specified — in either a single notice of appeal or multiple notices of appeal — in order to be reviewable on appeal.]")
McMahon failed to file a respondents brief. Accordingly, we decide the appeal on the record, the opening brief and appellants oral argument. (Cal. Rules of Court, rule 17(a)(2).)
CONTENTIONS
The individual defendants contend the trial court erred by denying their special motions to strike under section 425.16 because McMahons lawsuit against them arises from their acts in furtherance of the rights of free speech and petition and, therefore, the anti-SLAPP statute applies.
DISCUSSION
1. The Anti-SLAPP Statute — Section 425.16
Section 425.16 — the anti-SLAPP statute — provides, "A cause of action against a person arising from any act of that person in furtherance of the persons right of petition or free speech under the United States or California Constitution in connection with a public issue shall be subject to a special motion to strike, unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim." (§ 425.16, subd. (b)(1).) Under the statute an "`act in furtherance of a persons right of petition or free speech under the United States or California Constitution in connection with a public issue includes: (1) any written or oral statement or writing made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law; (2) any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law; (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." (& sect; 425.16, subd. (e).)
"[A] defendant moving to strike a cause of action arising from a statement made before, or in connection with an issue under consideration by, a legally authorized official proceeding [under clauses (1) and (2) of section 425.16, subdivision (e),] need not separately demonstrate that the statement concerned an issue of public significance." (Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th 1106, 1123, fn. omitted (Briggs).) However, a defendant seeking to strike a cause of action that arises from conduct described in clauses (3) and (4) of subdivision (e) of the statute must demonstrate the matter concerns an issue of public interest to fall within the ambit of the anti-SLAPP statute. (Id. at pp. 1117-1118; see also DuPont Merck Pharmaceutical Co. v. Superior Court (2000) 78 Cal.App.4th 562, 567.)
In ruling on a defendants special motion to strike under section 425.16, the trial court engages in 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. The moving defendants 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).) 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. Under section 425.16, subdivision (b)(2), the trial court in making these determinations considers `the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based." (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67.) "`The defendant has the burden on the first issue, the threshold issue; the plaintiff has the burden on the second issue. [Citation.] [Citation.]" (Kajima Engineering & Construction, Inc. v. City of Los Angeles (2002) 95 Cal.App.4th 921, 928 (Kajima).)
"`In terms of the so-called threshold issue, the moving defendants burden is to show the challenged cause of action "arises" from protected activity. [Citations.]" (Kajima, supra, 95 Cal.App.4th at p. 928.) "[T]he statutory phrase `cause of action . . . arising from means simply that the defendants act underlying the plaintiffs cause of action must itself have been an act in furtherance of the right of petition or free speech. [Citation.] In the anti-SLAPP context, the critical point is whether the plaintiffs cause of action itself was based on an act in furtherance of the defendants right of petition or free speech. [Citations.] `A defendant meets this burden by demonstrating that the act underlying the plaintiffs cause of action fits one of the categories spelled out in section 425.16, subdivision (e) . . . . [Citations.]" (City of Cotati v. Cashman (2002) 29 Cal.4th 69, 78.)
A defendant meets its threshold burden by showing any of the acts alleged in a cause of action was in furtherance of First Amendment rights in connection with a public issue: "[A] plaintiff cannot frustrate the purposes of the SLAPP statute through a pleading tactic of combining allegations of protected and nonprotected activity under the label of one `cause of action." (Fox Searchlight Pictures, Inc. v. Paladino (2001) 89 Cal.App.4th 294, 308 (Fox Searchlight); see also Finke v. Walt Disney Co. (2003) 110 Cal.App.4th 1210 (Finke).)
"We review the trial courts rulings on a SLAPP motion independently under a de novo standard of review." (Kajima, supra, 95 Cal.App.4th at p. 929.)
2. The Trial Court Erred in Concluding the Individual Defendants Had Failed to Meet their Threshold Burden to Show McMahons Complaint Arose from Acts in Furtherance of Their Right of Petition or Free Speech
The individual defendants argue the allegations in McMahons complaint fall within the purview of the anti-SLAPP statute because all of their challenged conduct arises from actions on behalf of the IRFs agenda of furthering First Amendment rights: "(1) Klausner and Manshardt were representing McMahon in defense of his First Amendment right to free speech and filed a First Amendment action in his case and (2) the sole reason for [Wests, Klausners and Manhardts] association with the Center and the IRF is to further their First Amendments rights to: (a) associate themselves with a nonprofit organization to raise issues of broad public interest, and (b) engage in their right to petition in the representation of indigent persons who have claims that raise constitutional issues and issues of public interest." The individual defendants contend their actions are thus covered by section 425.16, subdivision (e)(4), as "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." At oral argument, relying on the Supreme Courts recent decision in Jarrow Formulas v. LaMarche (2003) 31 Cal.4th 728 (anti-SLAPP statute applies to malicious prosecution actions), the individual defendants even more broadly asserted that section 425.16 may apply to every litigation-related breach of fiduciary duty or legal malpractice claim because such actions by their very nature arise from an underlying lawsuit or petition to the judicial branch. (See Briggs, supra, 19 Cal.4th at p. 1120 ["the Legislatures intent consistently has been to protect all direct petitioning of governmental bodies . . . including . . . courts . . . ."].)
Because a cause of action falls within the purview of the anti-SLAPP statute if any of the acts alleged was in furtherance of the rights of petition or free speech (Finke, supra, 110 Cal.App.4th at p. 1227; Fox Searchlight, supra, 89 Cal.App.4th at p. 308), we need not reach this potentially far-reaching issue to conclude the trial court erred in finding the individual defendants had failed to make the requisite threshold showing for section 425.16 to apply.
Paragraph 47 of McMahons complaint, incorporated by reference into each of the causes of action asserted against the individual defendants, alleges that the IRF and the Center "falsely held themselves out to be . . . `a conservative Legal Organization with a network of 800 affiliate attorneys . . . involved in the Legal hand-to-hand fighting necessarily to blunt the onslaught of the ACLU [and] the NAACP . . . and that the IRF is included in the pro-bono programs of the nations most prestigious law firms including defendant David Wests firm of Gibson, Dunn and Crutcher." Paragraph 65, part of the fourth cause of action against West, Klausner and Manshardt, which is also incorporated by reference into each of the other claims against the individual defendants, alleges West, Klausner and Manshardt each breached fiduciary duties owed to McMahon by improperly concealing the fact that the IRF and the Center were "raising substantial funds under false pretenses from contributors misled by defendants[ ] false statements into thinking they were donating to a tax exempt organization similar to the ACLU and NAACP."
To the extent McMahons claims are thus grounded, at least in part, in allegations that the individual defendants improperly participated in allegedly illegal fund raising activities on behalf of the IRF, the complaint is plainly based an acts in furtherance of the defendants First Amendment rights. "[S]olicitation of charitable contributions is protected speech." (Riley v. National Federation of Blind (1988) 487 U.S. 781, 789 [108 S.Ct. 2667, 101 L.Ed.2d 669].) "[C]haritable appeals for funds, on the street or door to door, involve a variety of speech interests — communication of information, the dissemination and propagation of views and ideas, and the advocacy of causes — that are within the protection of the First Amendment." (Schaumberg v. Citizens for Better Environ. (1980) 444 U.S. 620, 632 [100 S.Ct. 826, 63 L.Ed.2d 73].) Accordingly, the trial court erred in concluding the claims against the individual defendants did not arise from protected activity. (Navellier v. Sletten (2002) 29 Cal.4th 82, 89 [cause of action subject to anti-SLAPP statute when it is "grounded in allegations" that involve the exercise of protected First Amendment rights].)
Materials presented to the trial court in connection with the individual defendants initial motion to strike pursuant to section 425.16 established that the IRF was created in 1993 by the Center "as a national lawyers network to respond to a growing threat against First Amendment rights posed by college administrators and government officials." The Centers and IRFs fund raising efforts include direct mail solicitations and foundational grants to support their efforts to protect free speech on college campuses. Given the nature of the IRFs mission, there can be little doubt that the solicitation of funds in this case concerned an issue of public interest. (See, e.g., Rivero v. American Federation of State, County and Municipal Employees, AFL-CIO (2003) 105 Cal.App.4th 913, 924.)
3. McMahon Did Not Demonstrate a Probability of Prevailing on his Claims
Once the defendant establishes the anti-SLAPP statute applies, the burden shifts to the plaintiff to establish a "reasonable probability" of success on the merits. (Equilon Enterprises v. Consumer Cause, Inc., supra, 29 Cal.4th at p. 67.) In this case, because the trial court decided the statute did not apply, it did not reach the question whether McMahon had demonstrated a probability he would prevail. As we recently held in Roberts v. Los Angeles County Bar Assn. (2003) 105 Cal.App.4th 604, 617, however, because this second step in the anti-SLAPP analysis, like the first, is subject to de novo review, the issue of the plaintiffs probability of prevailing on the claim is properly decided at this time notwithstanding the absence of a ruling by the trial court. (See Navellier v. Sletten, supra, 29 Cal.4th at p. 95; Finke, supra, 110 Cal.App.4th at p. 1231, fn. 58.)
In denying the IRFs section 425.16 motion, the trial court did note that McMahon "has not submitted any evidence — documentary or testimonial — in support of the merits of his claim, and the Complaint itself is unverified." The court construed McMahons failure to submit supporting evidence as a waiver of his right to do so. McMahons opposition to the individual defendants initial motions to strike is identical to his opposition to the IRF motion and similarly fails to make any attempt to meet his burden of demonstrating a probability of prevailing on his claims against the individual defendants.
"In order to establish a probability of prevailing on the claim [citation], a plaintiff responding to an anti-SLAPP motion must `"state[] and substantiate[] a legally sufficient claim." [Citations.] 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. [Citations.] In deciding the question of potential merit, the trial court considers the pleadings and evidentiary submissions of both the plaintiff and the defendant [citation]; though the court does not weigh the credibility or comparative probative strength of competing evidence, it should grant the motion if, as a matter of law, the defendants evidence supporting the motion defeats the plaintiffs attempt to establish evidentiary support for the claim." (Wilson v. Parker, Covert & Chidester (2002) 28 Cal.4th 811, 821.)
McMahons opposition to the individual defendants initial motions to strike is directed entirely to the argument that his lawsuit is not subject to an anti-SLAPP motion and contains no evidence to support the allegations of misconduct contained in his unverified complaint. The allegations in an unverified complaint, standing alone, are insufficient to satisfy the plaintiffs burden of demonstrating a probability of prevailing on the claim. (DuPont Merck Pharmaceutical Co. v. Superior Court, supra, 78 Cal.App.4th at p. 568; see Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 412 [to satisfy second prong plaintiff must "state[] and substantiate[] a legally sufficient claim."].) Accordingly, because McMahons claims against the individual defendants arise from protected activity, the trial court should have dismissed the complaint as to them under section 425.16.
In his opposition to the individual defendants renewed motion to strike pursuant to section 425.16, McMahon did submit a variety of documents that he argued demonstrated the individual defendants impermissible conflicts of interest and otherwise supported his claims of breach of fiduciary duty. None of this material is properly considered in determining whether McMahon demonstrated a probability of prevailing on his claims in response to the individual defendants initial motions.
DISPOSITION
The order of August 29, 2001 denying the individual defendants special motions to strike under section 425.16 is reversed. The cause is remanded to the trial court with directions to enter a new and different order granting the motions and for further proceedings not inconsistent with this opinion. The individual defendants are to recover their costs on appeal.
We concur: JOHNSON, J. WOODS, J.