Kazi v. Rosen & Assocs. CA2/7 ( 2013 )

Filed 12/2/13 Kazi v. Rosen & Assocs. CA2/7
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 SEVEN
ZUBAIR KAZI et al., B241539
Plaintiffs and Appellants, (Los Angeles County
Super. Ct. No. BC471055)
v.
ROSEN & ASSOCIATES, et al.,
Defendants and Respondents.
APPEAL from orders of the Superior Court of Los Angeles County, Ronald
M. Sohigian, Judge. Affirmed.
Baker Marquart, Ryan G. Baker, Jaime W. Marquart and Kevin R. Boyle
for Plaintiffs and Appellants.
Nemecek & Cole, Jonathan B. Cole, Mark Schaeffer and Lucy H. Mekhael
for Defendants and Respondents Rosen & Associates, Robert C. Rosen and John B.
Wallace.
Rosen & Associates, Robert C. Rosen, John B. Wallace and David Paul
Bleistein for Defendants and Respondents Penny McCoy and Chandrashekhar Joshi.
________________________________
INTRODUCTION
In the original federal action, two corporate shareholders, represented by counsel,
filed a complaint against the corporation and related entities, asserting numerous causes
of action, including claims for alleged violations of the Racketeer Influenced and Corrupt
Organizations Act (RICO). (18 U.S.C. § 1961 et seq.) The district court ultimately
entered judgment as a matter of law against the shareholders and in favor of the corporate
entities on the RICO claims; because the RICO claims were the sole basis for federal
jurisdiction (and the district court found the corporate defendants had elected not to
challenge these claims for their own strategic purposes as they wished to proceed in
federal court), the district court declined to exercise supplemental jurisdiction over the
multiple remaining claims, and the action was transferred to state court.
With the corporate shareholders’ remaining state claims still pending, the
corporate entities then filed an action for malicious prosecution and abuse of process
against the two corporate shareholders and their counsel, based on the RICO claims.
The corporate shareholders and their counsel, in turn, filed a special motion to
strike the complaint for malicious prosecution and abuse of process pursuant to Code of
Civil Procedure section 425.16. Over the corporate entities’ opposition, the trial court
granted the special motion to strike.
The corporate entities appeal. Because the corporate entities failed to satisfy their
burden to demonstrate a probability of prevailing on their claims for malicious
prosecution and abuse of process, we affirm.
FACTUAL AND PROCEDURAL SUMMARY
In October 2011, Zubair Kazi, Kazi Foods, Inc. and Kazi Management VI, LLC
(Kazi unless otherwise noted) filed a complaint for (1) malicious prosecution and (2)
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abuse of process against Penny McCoy and Chandrasekhar Joshi as well as their
attorneys Rosen & Associates, P.C. (Rosen), Robert C. Rosen and John B. Wallace.1
According to Kazi’s complaint, in October 2008, on behalf of McCoy, Rosen filed
a verified complaint against Kazi in federal court, asserting causes of action including
“purported RICO [claims].” The complaint was amended three times but always
included the RICO claims—claims with no basis or merit. Although the litigation lasted
nearly two years and trial lasted almost a month, Kazi alleged, McCoy and Rosen made
no effort to pursue their RICO claims and refused to dismiss them; they never attempted
to obtain evidence relating to their RICO claims and never attempted to provide such
evidence at trial. Therefore, Kazi alleged, when trial concluded, the district court granted
Kazi’s motion for judgment as a matter of law on the RICO claims and entered a verdict
against McCoy and Rosen in Kazi’s favor, stating on the record that the RICO claims
were baseless and without merit.
In other words, Kazi alleged, McCoy and Rosen “[lacked] probable cause to seek
the RICO claims” and “possessed malice when they filed and refused to dismiss their
RICO claims.” “Indeed, [they] used the litigation process and RICO claims to perpetuate
an injustice, obtain a collateral and/or illegal objective, harass, annoy, intimidate and/or
threaten [Kazi] and to cause [him] to incur legal fees and costs and to cause [him]
exceptional difficulty in defending [himself] in the federal case to coerce inequitable
settlements and results . . . .”
1 We include Chandrasekhar in our references to McCoy unless otherwise indicated;
we include the individual attorneys (Rosen and Wallace) in our references to Rosen
unless otherwise indicated.
3
McCoy and Rosen answered and filed special motions to strike pursuant to Code
of Civil Procedure section 425.16.2 (All further statutory references are to the Code of
Civil Procedure.) In their special motions to strike (discussing RICO case law and
supported by declarations and documentary evidence describing attorney John Wallace’s
investigation and evidence obtained), McCoy and Rosen argued Kazi could not establish
a probability of prevailing on their malicious prosecution claim because Kazi could not
establish as a matter of law that McCoy and Rosen lacked probable cause to bring and
maintain their RICO claims against Kazi and Kazi’s abuse of process claim was barred
by the litigation privilege of Civil Code section 47, subdivision (b) (among other
grounds).3
Kazi filed opposition, supported by the declaration of Kazi’s attorney (Alexander
Gareeb), in which Gareeb asserted McCoy and Rosen failed to conduct discovery; when
he sought an explanation, “the attorneys” told him they could not provide a basis and
would need an expert; on June 22, 2010, the district court prohibited McCoy from
presenting its designated expert (Professor G. Robert Blakey) for failure to attach his
expert report; attorney Wallace acknowledged RICO claims were “tough to maintain” but
the goal was to “get treble damage”; the district court “mention[ed]” the RICO claims as
tenuous at best; Rosen’s opening statement concerning the RICO claims was “very brief,
conclusory”; Rosen did not acknowledge an agreement with Kazi’s counsel to dismiss the
RICO claims; Kazi was forced to file a motion for judgment as a matter of law; and at the
2 Because it is undisputed that Kazi’s malicious prosecution and abuse of process
causes of action satisfy the “first prong” of section 425.16 (requiring McCoy and Rosen
to demonstrate that Kazi’s claims are subject to section 425.16), we focus our attention
on the “second prong” which requires Kazi to establish a probability of prevailing on its
claims as we will further discuss.
3 In addition, McCoy and Rosen argued Kazi could not establish McCoy and Rosen
acted with malice in filing and maintaining the RICO claims against Kazi for purposes of
the malicious prosecution claim and Kazi’s entire action was barred by the statutes of
limitations.
4
September 8, 2010, hearing on that motion, Rosen tried to dismiss its RICO claims but
the district court would not allow a voluntary dismissal at that point and instead granted
the motion, stating in its order the claims “had no merit.”
McCoy and Rosen filed objections to several paragraphs of Gareeb’s declaration
and filed a reply. The trial court sustained a number of these objections. In addition, the
trial court took judicial notice of documents filed in federal court but did not accept
findings in that case for their truth.
The trial court granted both motions to strike Kazi’s complaint.
Kazi appeals.
DISCUSSION
I. Section 425.16.
Section 425.16, subdivision (b)(1), provides as follows: “A cause of action against
a person arising from any act of that person in furtherance of the person’s 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.”
“Resolution of an anti-SLAPP motion ‘requires the court to engage 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
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).) 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.’” (Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal. 4th 728, 733 (Jarrow),
quoting Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal. 4th 53, 67.)
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A. The “[A]rising from” Prong.
The “plain language of the ‘arising from’ prong encompasses any action based on
protected speech or petitioning activity as defined in the statute.” (Jarrow, supra, 31
Cal.4th at p. 734, citation omitted.) “By definition, a malicious prosecution suit alleges
that the defendant committed a tort by filing a lawsuit.” (Id. at p. 735, citation omitted.)
Accordingly, malicious prosecution actions fall within the purview of the anti-SLAPP
statute. (Ibid., citations omitted.) Similarly, claims for abuse of process in an earlier
lawsuit are subject to an anti-SLAPP motion. (Rusheen v. Cohen (2006) 37 Cal. 4th 1048,
1063 [motion properly granted because execution levy was protected under litigation
privilege]; and see Weil & Brown, Cal. Prac. Guide: Civil Procedure Before Trial (The
Rutter Group 2013) ¶ 7:642, p. 7(II)-17.)
B. The “[P]robability of [P]revailing” Prong
After determining that a challenged cause of action arises from protected
petitioning activity, a court ruling on an anti-SLAPP motion then “‘determines whether
the plaintiff has demonstrated a probability of prevailing on the claim.’” (Jarrow, supra,
31 Cal.4th at p. 741, citation omitted; Navellier v. Sletten (2002) 29 Cal. 4th 82, 93 [to
withstand a special motion to strike, a plaintiff must demonstrate that the claims are
legally sufficient]; Grewal v. Jammu (2011) 191 Cal. 4th 977, 989 [same].) Therefore,
from the outset, a malicious prosecution plaintiff must be prepared to show a probability
of prevailing—that is, the malicious prosecution plaintiff must demonstrate that the
earlier lawsuit was filed “maliciously” and “without probable cause.” (Jarrow, supra, 31
Cal.4th at p. 740, fn. 8.)
The plaintiff must also present competent admissible evidence sufficient to
overcome any privilege or defense to the claim asserted by the defendant. (Flatley v.
Mauro (2006) 39 Cal. 4th 299, 323 [litigation privilege (Civ. Code, § 47, subd. (b))].)
The plaintiff must show there is admissible evidence that, if credited, would be sufficient
to sustain a favorable judgment, similar to but not identical to the burden in opposing a
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summary judgment motion. (McGarry v. University of San Diego (2007) 154
Cal. App. 4th 97, 108; and see Weil & Brown, Cal. Prac. Guide: Civ. Proc. Before Trial,
supra, ¶ 7:1021.5, pp. 7(II)-56 to 7(II)-57.)
The court does not weigh credibility or compare comparative strength of the
evidence. The court considers defendant’s evidence only to determine if it defeats
plaintiff’s showing as a matter of law. (Soukup v. Law Offices of Herbert Hafif (2006) 39
Cal. 4th 260, 291; Integrated Healthcare Holdings, Inc. v. Fitzgibbons (2006) 140
Cal. App. 4th 515, 522; Overstock.com, Inc. v. Gradient Analytics, Inc. (2007) 151
Cal. App. 4th 688, 699-700.) Declarations not based on personal knowledge, or that
contain hearsay or impermissible opinions, or that are argumentative, speculative or
conclusory, are insufficient to show a “probability” that a plaintiff will prevail. (Gilbert
v. Sykes (2007) 147 Cal. App. 4th 13, 26; Dwight R. v. Christy B. (2013) 212 Cal. App. 4th
697, 714.) While the existence of a court order may be judicially noticed, the truth of the
matters asserted in the order, including the court’s factual findings, is not entitled to
notice; thus, a plaintiff cannot rely on facts stated in a court order to establish a
probability of prevailing. (See Steed v. Department of Consumer Affairs (2012) 204
Cal. App. 4th 112, 121, 124.)
“In a malicious prosecution action, the legal aspect of probable cause requires a
determination whether the prior claim for relief was legally tenable. (Sheldon Appel Co.
v. Albert & Oliker [(1989)] 47 Cal.3d [863,] 885-886 [(Sheldon Appel)].)
Consideration of this question requires that the court take account of the evolutionary
potential of legal principles and any uncertainty which might be embedded there. (Ibid.)
‘To hold that the person initiating civil proceedings is liable unless the claim proves to be
valid, would throw an undesirable burden upon those who by advancing claims not
heretofore recognized nevertheless aid in making the law consistent with changing
conditions and changing opinions. There are many instances in which a line of authority
has been modified or rejected. To subject those who challenge this authority to liability
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for wrongful use of civil proceedings might prove a deterrent to the overturning of
archaic decisions.’” (Leonardini v. Shell Oil Co. (1989) 216 Cal. App. 3d 547, 568
(Leonardini).) “In order to avoid chilling the assertion of novel or debatable legal claims
the California Supreme Court has adopted, with appropriate modifications, the standard
for determining whether an appeal is frivolous (In re Marriage of Flaherty [(1982)] 31
Cal.3d [637,] 650), as the standard for determining probable cause in a malicious
prosecution action. (Sheldon Appel, supra, 47 Cal.3d at pp. 885-886.) Under this
standard a claim is not lacking in probable cause if any reasonable attorney would have
thought the claim tenable.” (Leonardini, supra, 216 Cal.App.3d at p. 568 citing Sheldon
Appel, supra, 47 Cal.3d at pp. 885-886.)
A malicious prosecution plaintiff cannot establish lack of probable cause based on
having obtained, as defendant in an earlier action, a defense summary judgment based on
insufficiency of the evidence. “[S]uccessfully defending a lawsuit does not establish that
the suit was brought without probable cause.” (Jarrow, supra, 31 Cal.4th at p. 743.) “A
litigant will lack probable cause for his actions if he relies upon facts which he has no
reasonable cause to believe to be true, or seeks recovery upon a legal theory which is
untenable under the facts known to him.” (Leonardini, supra, 216 Cal.App.3d at p. 568.)
In evaluating the issue of probable cause, “a court must properly take into account the
evolutionary potential of legal principles.” (Sheldon Appel, supra, 47 Cal.3d at p. 886.)
Expert testimony is inadmissible; objective tenability of the prior action is a question of
law to be determined by the court so it is error to admit such evidence. (Id. at p. 884
[“experts may not give opinions on matters which are essentially within the province of
the court to decide”].)
The elements of a RICO claim are: (1) conduct (2) of an enterprise engaged in or
affecting interstate commerce (3) through a pattern (4) of racketeering activity (5) that
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causes injury to the business or property of the plaintiff.4 (18 U.S.C. §§ 1962, 1964,
subd. (c); see Sedima, S.P.R.L. v. Imrex Co., Inc. (1985) 473 U.S. 479, 496.) McCoy and
Rosen presented extensive evidence supporting the objective tenability of the RICO
claim, and the trial court’s exclusion of expert testimony through the grant of Kazi’s
motion in limine does not establish the absence of probable cause as a matter of law.
Yet, Kazi made no effort whatsoever to address the facts or legal theory underlying
McCoy’s RICO claims or to establish that, as an objective matter, no reasonable attorney
would have thought the claims tenable. (Sheldon, supra, 47 Cal.3d at pp. 885-886.) For
this reason alone, the trial court properly granted the motions to strike as to the malicious
prosecution cause of action. If there are facts to conclusively establish a reasonable basis
for suit, the existence of other disputed facts is irrelevant. (Sangster v. Paetkau (1998) 68
Cal. App. 4th 151, 167.) Weaknesses in the evidence do not result in a lawsuit completely
and totally devoid of merit. (Jarrow, supra, 31 Cal.4th at p. 742.)
In Sheldon Appel, supra, 47 Cal. 3d 863, the Supreme Court rejected the
objective/subjective approach to a probable cause determination. Probable cause is to be
determined in all instances by an objective standard, that is, whether the prior action was
objectively reasonable. If it was objectively reasonable then the defendant is entitled to
4 Simply stated, Kazi misperceives his own burden in establishing a probability of
prevailing on his RICO claims, and it is therefore unnecessary to address the complexities
of these claims (although McCoy and Rosen presented evidence in support of them).
With respect to the malicious prosecution cause of action, Kazi confuses the lack of
probable cause element (an objective standard) with the malice element. His reliance
upon the prior action’s termination in his favor, inadmissible district court statements, his
claims McCoy and Rosen failed to conduct discovery (not only a mischaracterization but
irrelevant to the probable cause determination, particularly in light of the status of the two
plaintiff shareholders) is at odds with California Supreme Court authority. (Jarrow
Formulas, Inc. v. LaMarche (2003) 31 Cal. 4th 728, 743, fn. 13, citations and internal
quotations omitted [only those “[s]uits which all reasonable lawyers agree totally lack
merit” present no probable cause]; Sheldon Appel, supra, 47 Cal.3d at p. 883 [rejecting
claim of inadequate research as basis for proving the absence of probable cause because it
is “fundamentally incompatible” with probable cause determination].)
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judgment in the malicious prosecution action regardless of what his subjective belief or
intent may have been. (Id. at pp. 878-879.) The purported evidence set forth in Gareeb’s
declaration is more properly characterized as potential evidence relating to the element of
malice, but not to the objective standard applicable to the probable cause element.
Similarly, as to Kazi’s abuse of process claim, after the trial court properly
excluded statements made “on information and belief” in Gareeb’s declaration, Kazi was
left with no evidence whatsoever in support of the abuse of process claim. Declarations
“on information and belief” are hearsay and hence insufficient to show a “probability”
that the plaintiff will prevail. (Evans v. Unkow (1995) 38 Cal. App. 4th 1490, 1497.)
Kazi’s assertion that no more is required at this “pleading stage” ignores the law
applicable to special motions to strike; to the contrary, only evidence
admissible at trial may be considered. (Ibid.)
Accordingly, the orders are properly affirmed.
DISPOSITION
The orders are affirmed. McCoy and Rosen (all respondents) are to recover their
costs as well as their attorney fees pursuant to Code of Civil Procedure section 425.16,
subdivision (c)(1).
WOODS, J.
We concur:
PERLUSS, P. J. ZELON, J.
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