Potter v. Swarovski CA2/5 ( 2023 )

Filed 6/22/23 Potter v. Swarovski CA2/5
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on
opinions not certified for publication or ordered published, except as specified by rule
8.1115(b). This opinion has not been certified for publication or ordered published for
purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FIVE
DEONTAY POTTER et al., B315782
Plaintiffs and Appellants, (Los Angeles County
Super. Ct. No.
v. 21STCV00048)
EVGENY SWAROVSKI,
Defendant and Respondent.
APPEAL from an order of the Superior Court of Los
Angeles County, Barbara Marie Scheper, Judge. Affirmed.
Law Office of Gronemeier & Hickambottom, Dale. L.
Gronemeier, and Elbie J. Hickambottom, Jr., for Plaintiffs and
Appellants.
No appearance by Defendant and Respondent.
Deontay Potter (Deontay) and Joy Potter (Joy) (collectively,
the Potters) sued attorney Evgeny Swarovski (Swarovski) and his
clients for malicious prosecution relating to a contract dispute.
Swarovski filed a special motion to strike the complaint pursuant
to the anti-SLAPP statute (Code Civ. Proc.,1 § 425.16). There
was, of course, no dispute that the malicious prosecution claim
arose from anti-SLAPP protected activity, and the trial court
found the Potters had not demonstrated a probability of success
on the merits. In this appeal from the order granting the anti-
SLAPP motion, we consider whether the trial court correctly
concluded there was no “minimal merit” showing that
Swarovski’s actions in the contract litigation were undertaken
with malice.
I. BACKGROUND
A. The Contract Litigation
Deontay is the president and sole shareholder of Clean Up
America, Inc. (Clean Up), which operated a construction waste
recycling facility in Los Angeles. A fire broke out at the facility in
2016, which burned and smoldered for several weeks.
Efforts to suppress the fire produced a pool of contaminated
wastewater, which Clean Up engaged Environmental Chemical
Consulting, Inc. (ECC) to remove. David Diaz (Diaz), ECC’s vice
president, signed a Waste Disposal and Transportation
Agreement (the contract) on behalf of ECC. Deontay also signed
the contract, which identified Deontay as the waste generating
party in the first line and Clean Up as the generator in the
1
Undesignated statutory references that follow are to the
Code of Civil Procedure.
2
signature block. The contract includes a provision that the party
prevailing in “an action . . . to enforce or interpret the terms of”
the contract is entitled to attorney fees.
The relationship rapidly deteriorated, and ECC filed a
complaint against Clean Up, Deontay, and others in Los Angeles
County Superior Court in January 2017. As pertinent here, ECC
alleged Clean Up breached the contract by failing to pay amounts
due and Deontay was liable as a personal guarantor. ECC’s
complaint attached a Customer Credit Application purportedly
signed by Deontay in which he agreed, among other things, “to
act as personal guarantor and co-signer . . . for all debts
incurred . . . by [Clean Up] . . . .”
Clean Up and Deontay filed a cross-complaint against ECC
and Diaz alleging, among other things, that Deontay’s signature
on the Customer Credit Application was a forgery. A first
amended cross-complaint added ECC’s president, David Rains
(Rains), as a defendant.
Deontay and his wife, Joy, filed for bankruptcy while the
superior court litigation was pending. ECC filed a proof of claim
in bankruptcy court for $212,957.40, based on Deontay’s
purported agreement to serve as personal guarantor for ECC.
Following an evidentiary hearing at which a forensic document
examiner testified for the Potters and Diaz admitted he had a
felony conviction for embezzlement through forgery, the
bankruptcy court determined “[Deontay’s] purported signature on
the personal guaranty section of the Customer Credit Application
3
[was] a forgery and [Deontay] did not in fact sign this document.”2
The bankruptcy court sustained the Potters’ objection to ECC’s
claim and “disallow[ed] ECC’s claim in its entirety as
unenforceable under applicable bankruptcy and California law.”
A few months after the Potters’ successful objection to
ECC’s proof of claim in bankruptcy court, Swarovski substituted
in as counsel for the ECC parties in the superior court litigation.
Shortly thereafter, on October 3, 2019, Swarovski sent an email
to Diaz and Rains discussing litigation strategy. Because the
Potters rely solely on the email to establish Swarovski’s
subjective view of the purpose of ECC’s lawsuit, we quote it in
full:
“Dear Davids [¶] FYI, there is a plan to dismiss
Potter as a defendant right before trial. [¶] Here is
why: while CUA [presumably, Clean Up America]
and P [presumably, Potter] do not have any merit on
the cross-complaint, Potters attorney may try to
claim attorney fees even if they [lose] on everything
but the forgery cause of action against Potter
personally. [¶] This is because the bk judge ruled
that Potter did not sign the guarantee and his
signature is forged. That ruling bars us from
litigating the issue of forgery. [¶] If he prevails at
trial he could ask for attorney fee. If we dismiss him
any time before trial starts, the[n] there is [sic] such
right. The most he can claim is the filing fee and
2
The bankruptcy court also rejected ECC’s contention that
Deontay’s signature on certain work orders made him liable as a
guarantor for Clean Up.
4
may be MSJ fee[ ] (up to 1k), which are so small they
are not worth the time to file in most cases. [¶] I am
tempted to dismiss the entire complaint and then just
sit and wait what they do at jury trial. Then they
would have to do all the work and we almost
guaranteed to prevail on their breach of action cross-
claim . . . . entitling us to attorney fee award :). [¶]
However, our own breach of contract claim is pretty
strong so lets keep it for now. [¶] Does it make any
sense? It may sound counter intuitive, but trust me
on this one. If you want to fall asleep further, read
the attached.”3
ECC dismissed without prejudice its claims alleged against
Deontay only in October 2019. ECC’s claims against other entity
defendants remained pending, as did Clean Up and the Potters’
cross-complaint. In January 2020 the trial court issued an order
allowing pretrial discovery of the ECC parties’ financial records
based on a substantial probability that Clean Up and the Potters
would be entitled to punitive damages.
In February 2020, ECC moved for leave to amend its
complaint to add the Potters as defendants and allege different
theories of recovery. Specifically, instead of alleging Deontay was
liable as a personal guarantor for Clean Up, the proposed first
amended complaint alleged Clean Up was an alter ego of the
Potters and, in the alternative, Deontay was liable under the
3
The files attached to the email are titled “Santisas v
Goodin.pdf” and “Attorneys’ Fees Awards to Contract
Nonsignatories_ Should Equitable Estoppel Inform the Discretion
of the Courts_.pdf.”
5
contract because it identified him as the waste generating party.
Deontay and Clean Up opposed ECC’s motion for leave to amend
arguing, among other things, that the bankruptcy court’s ruling
barred the proposed claims against the Potters. The trial court
granted ECC’s motion for leave to amend.
The Potters demurred to ECC’s first amended complaint,
again arguing the bankruptcy court’s ruling precluded the claims
against them: ECC’s proof of claim in the bankruptcy proceedings
concerned the same primary right (the right to be paid under the
contract), involved the same parties, and was subject to a final
judgment on the merits. Around the same time, Deontay moved
for prevailing party attorney fees based on the bankruptcy court’s
ruling.
ECC did not oppose the demurrer and instead dismissed
the first amended complaint with prejudice in June 2020.
Deontay subsequently withdrew his motion for attorney fees
based on ECC’s contention that the motion was premature “and
in reliance on [ECC] being estopped thereby from objecting that
[Deontay] should have pursued the relief earlier.”
B. The Potters’ Malicious Prosecution Action and
Swarovski’s Anti-SLAPP Motion
The Potters subsequently filed a complaint for malicious
prosecution against ECC, Diaz, Rains, and Swarovski in January
2021. The complaint alleged ECC, Diaz, and Rains maliciously
prosecuted claims based on the forged signature to the Customer
Credit Application and alleged all defendants—including
attorney Swarovski—were liable for filing the first amended
complaint after the adverse ruling in the bankruptcy court.
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Swarovski filed a special motion to strike the Potters’
complaint pursuant to the anti-SLAPP statute on behalf of
himself, ECC, Diaz, and Rains. The defendants other than
Swarovski settled with the Potters before the trial court ruled on
the anti-SLAPP motion.
The anti-SLAPP motion argued the personal guaranty
cause of action against Deontay was promptly dismissed when
Swarovski substituted in as counsel and there was probable
cause to sue the Potters under different theories in the first
amended complaint. Swarovski suggested “[t]he whole res
judicata effect of the ruling in the bankruptcy court is a complex
issue, which scope lies outside of this brief,” but emphasized the
bankruptcy court “never ruled that the [Potters] could not be held
liable under any other theory.” Swarovski further contended the
dismissal of the first amended complaint was not prompted by
the Potters’ demurrer, but rather “a combination of factors.”
These included the Potters’ motion for attorney fees (“dismissal
would serve as a complete bar to recovery”); the fact that Clean
Up and the Potters were judgment-proof; the prospect of an
attorney fee award if ECC, Diaz, and Rains prevail in defending
against Clean Up and Deontay’s cross claims in the underlying
litigation; and the notion that “[t]actically it is easier to defend
civil lawsuits than prosecute them . . . .”
The Potters anti-SLAPP opposition conceded the malicious
prosecution complaint arose from protected litigation activity but
contended they could demonstrate a probability of success on the
merits. They argued Swarovski lacked probable cause to file the
first amended complaint because ECC’s claims were barred by
res judicata, ECC’s voluntary dismissal of the action was a
favorable termination, and Swarovski’s improper purpose in
7
filing the first amended complaint is expressed in his October
2019 litigation strategy email.
In reply, Swarovski contended the October 2019 email
reflected “proper litigation tactic[s].” Specifically, although he
believed the theories asserted in the first amended complaint
were meritorious, he advised his clients to dismiss their original
claims before trial because Clean Up and the Potters were
judgment-proof and it would be wise to eliminate the possibility
of an attorney fees award. Swarovski submitted excerpts of a
deposition transcript in which he was asked about his “plan to
dismiss Potter as a defendant right before trial” reflected in the
October 2019 email and claimed that he “meant to say dismiss
the entire complaint.” He suggested his email’s reference to
“keep[ing]” a “pretty strong” contract claim showed he was
“debating with [him]self as to when to do the dismissal.”
C. The Trial Court’s Ruling
The trial court determined the Potters failed to
demonstrate a probability of success on the merits and granted
Swarovski’s motion. The trial court found the Potters carried
their burden with respect to two of the three elements of a
malicious prosecution claim: ECC’s voluntary dismissal of its
claims in the underlying lawsuit represented a termination
favorable to the Potters and Swarovski did not have probable
cause to file the first amended complaint. The Potters failed,
however, to “present[ ] any arguments or evidence regarding
malice.” “Unlike the other [d]efendants, Swarovsk[i] became
involved in the case in 2019 and cannot be tarred with allegations
that he was involved in forging the guaranty. In deposition[,]
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Swarovsk[i] explained the e-mail and the reason he ultimately
dismissed the amended complaint.”
II. DISCUSSION
The Potters contend the trial court erred in finding no
evidence to support the malice element of their malicious
prosecution claim. They argue Swarovski’s improper purpose in
filing the first amended complaint is manifest in the October
2019 email and, in any case, malice may be inferred from the
weakness of the claims asserted in the first amended complaint.
Neither argument has merit. Swarovski and ECC did not follow
the “plan” sketched in the October 2019 email, and the email does
not indicate Swarovski’s view of the merits of the claims asserted
in the first amended complaint. Although a lack of probable
cause plus other evidence that Swarovski did not subjectively
believe the first amended complaint had merit would support a
finding of malice, the Potters do not identify any such evidence in
the record.
A. Anti-SLAPP Law
The anti-SLAPP statute “authorizes a special motion to
strike claims ‘arising from any act of [the moving party] in
furtherance of [the party’s] right of petition or free speech under
the United States Constitution or the California Constitution in
connection with a public issue.’ (§ 425.16, subd. (b)(1).)” (Wilson
v. Cable News Network, Inc. (2019) 7 Cal.5th 871, 884.) The
statute “‘does not insulate defendants from any liability for
claims arising from the protected rights of petition or speech. It
only provides a procedure for weeding out, at an early stage,
meritless claims arising from protected activity.’” (Monster
9
Energy Co. v. Schechter (2019) 7 Cal.5th 781, 788 (Monster
Energy).)
“‘Resolution of an anti-SLAPP motion involves two steps.
First, the defendant must establish that the challenged claim
arises from activity protected by section 425.16. [Citation.] If the
defendant makes the required showing, the burden shifts to the
plaintiff to demonstrate the merit of the claim by establishing a
probability of success. [Our Supreme Court has] described this
second step as a “summary-judgment-like procedure.” [Citation.]
The 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. 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. [Citation.] “[C]laims with the requisite minimal
merit may proceed.’” [Citation.]” (Monster Energy, supra, 7
Cal.5th at 788.)
Our review of the denial of an anti-SLAPP motion is de
novo. (Monster Energy, supra, 7 Cal.5th at 788.)
B. The Potters Did Not Satisfy Their Burden as to
Malice
The tort of malicious prosecution protects a person’s
“‘interest in freedom from unjustifiable and unreasonable
litigation’ [citation] . . . .” (Sheldon Appel Co. v. Albert & Oliker
(1989) 47 Cal.3d 863, 882 (Sheldon Appel), italics omitted.) “The
tort consists of three elements. The underlying action must have
been: (i) initiated or maintained by, or at the direction of, the
defendant, and pursued to a legal termination in favor of the
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malicious prosecution plaintiff; (ii) initiated or maintained
without probable cause; and (iii) initiated or maintained with
malice. [Citations.]” (Parrish v. Latham & Watkins (2017) 3
Cal.5th 767, 775-776.) Because malicious prosecution actions
have “the potential to impose an undue ‘chilling effect’ on the
ordinary citizen’s willingness to report criminal conduct or to
bring a civil dispute to court, . . . the tort has traditionally been
regarded as a disfavored cause of action” and “the elements of the
tort have historically been carefully circumscribed so that
litigants with potentially valid claims will not be deterred from
bringing their claims to court by the prospect of a subsequent
malicious prosecution claim.” (Sheldon Appel, supra, at 872.)
“‘As an element of malicious prosecution, malice “reflects
the core function of the tort, which is to secure compensation for
harm inflicted by misusing the judicial system, i.e., using it for
something other than to enforce legitimate rights and secure
remedies to which the claimant may tenably claim an
entitlement.”’ [Citation.]” (Area 55, LLC v. Nicholas &
Tomasevic, LLP (2021) 61 Cal.App.5th 136, 169 (Area 55).) “‘The
“malice” element . . . relates to the subjective intent or purpose
with which the defendant acted in initiating the prior action.
[Citation.] The motive of the defendant must have been
something other than that of bringing a perceived guilty person
to justice or the satisfaction in a civil action of some personal or
financial purpose. [Citation.] The plaintiff must plead and prove
actual ill will or some improper ulterior motive.’ [Citations.]”
(Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260,
292, italics omitted.)
“‘“Since parties rarely admit an improper motive, malice is
usually proven by circumstantial evidence and inferences drawn
11
from the evidence.”’ [Citation.]” (Area 55, supra, 61 Cal.App.5th
at 170.) A lack of probable cause is probative of an improper
motive, but it is not alone sufficient to draw such an inference.
(Gruber v. Gruber (2020) 48 Cal.App.5th 529, 538 [“Malice
requires more than proof that the party acted without probable
cause”]; Zhang v. Chu (2020) 46 Cal.App.5th 46, 57 [the
argument that a finding of no probable cause is sufficient to
demonstrate malice “is legally invalid”]; HMS Capital, Inc. v.
Lawyers Title Co. (2004) 118 Cal.App.4th 204, 218 [“the lack of
probable cause must be supplemented by other, additional
evidence”].)
1. The October 2019 email is insufficient evidence
of malice under the anti-SLAPP minimal merit
standard
The Potters primarily attempt to carry their burden to
demonstrate a probability of success in showing malice by
arguing Swarovski’s October 2019 email is direct evidence that
the first amended complaint was filed with an improper purpose.
They focus on Swarovski’s reference to “all the work” Deontay
would have to do if ECC dismissed Deontay immediately before
trial and they suggest Swarovski “intended to impose costs on
[Deontay] for the work defending a claim that was going to be
dismissed before it could reach the merits.”
That misreads the plain import of the email. The pertinent
text has nothing to do with the burden of defending against
ECC’s claims. Rather, Swarovski highlighted potential
advantages of dismissing ECC’s “entire complaint” and forcing
Clean Up and Deontay “to do all the work” prosecuting their
cross-claims: “I am tempted to dismiss the entire complaint and
12
then just sit and wait what they do at jury trial. Then they
would have to do all the work and we almost guaranteed to
prevail on their breach of action cross-claim . . . . entitling us to
attorney fee award :).”
More generally, any probative value that Swarovski’s
sketch of his plan might have as to the malice element of a
malicious prosecution claim is undermined by the fact that he
and ECC did not execute that plan. Instead of continuing to
prosecute the personal guaranty cause of action against
Deontay—a proposal that was qualified by Swarovski’s
“tempt[ation]” to dismiss the action and not pursue any
affirmative claims—ECC dismissed the complaint as against
Deontay soon after Swarovski sent the email. Further, nowhere
in the email did Swarovski contemplate the theories ECC
subsequently asserted against the Potters in the first amended
complaint. Although Swarovski’s acknowledgment that the
bankruptcy ruling “bar[red] [ECC] from litigating the issue of
forgery” is an admission that the personal guaranty cause of
action was not viable, it is speculative to assume Swarovski
understood the ruling to preclude claims against the Potters that
did not depend on the authenticity of the Customer Credit
Application signature.
2. Circumstantial evidence
As we have already discussed, while a lack of probable
cause can be a factor considered on the issue of malice, it is not
alone sufficient to demonstrate malice. The Potters contend
Swarovski’s improper purpose may also be inferred from his
failure to read the bankruptcy court’s ruling before he filed the
first amended complaint, ECC’s failure to oppose the Potters’
13
demurrer, and Swarovski’s “dismissive” treatment of the res
judicata issue in the anti-SLAPP motion. The first argument
rests on a misreading of the record, and the others rely on
speculation.
Although the trial court suggested “Swarovsk[i][ ] fail[ed] to
even read the bankruptcy court decision before amending the
complaint,” the appellate record does not support this statement.
In his deposition testimony, Swarovski admitted he likely did not
review the bankruptcy court’s ruling before he sent the October
2019 email. But he did testify he reviewed the ruling before
dismissing the initial complaint against Deontay. Because the
first amended complaint was filed after that, the only relevant
evidence indicates Swarovski did review the bankruptcy court’s
ruling before filing the first amended complaint.
Turning to ECC’s failure to oppose the demurrer, that is
not probative of Swarovski’s motives in filing the first amended
complaint. Even putting aside Swarovski’s assertion that there
were legitimate strategic motives for that decision, the Potters’
position would require parties to prosecute non-meritorious
claims to the bitter end to avoid an inference of malice. That is
not the law, as it would run contrary to the policy foundations of
the malicious prosecution tort. (Zamos v. Stroud (2004) 32
Cal.4th 958, 969 [“Continuing an action one discovers to be
baseless harms the defendant and burdens the court system just
as much as initiating an action known to be baseless from the
outset”]; Daniels v. Robbins (2010) 182 Cal.App.4th 204, 226
[“malice can be inferred when a party continues to prosecute an
action after becoming aware that the action lacks probable
cause”].) Further, even if Swarovski’s stated reasons for
dismissing the action are false and he was ultimately persuaded
14
by the Potters’ res judicata argument, there is still no evidence
that he believed the claims were barred when he filed the first
amended complaint.4
The Potters additionally contend Swarovski’s indifference
to the viability of the claims asserted in the first amended
complaint is demonstrated by his statement in the anti-SLAPP
motion that “[t]he whole res judicata effect of the ruling in the
bankruptcy court is a complex issue, which lies outside the scope
of this brief.” The Potters’ framing suggests that, between the
non-opposition to the demurrer and this statement, Swarovski
never bothered to reckon with the preclusive effect of the
bankruptcy court’s ruling. It is speculative, however, to reason
that Swarovski’s views as to the merits of the first amended
complaint at the demurrer stage and in his anti-SLAPP motion
reflect his views at the time of filing. In any case, Swarovski’s
arguments in other parts of the anti-SLAPP motion suggest he
was even then under the impression that the bankruptcy court’s
ruling barred only those claims premised on a personal guarantee
by Deontay. He argued, for instance, that the bankruptcy court
“never stated that the [Potters] did not owe ECC any money
under any theory . . . .”
Because the Potters did not inquire as to “the extent of
[Swarovski’s] investigation and research” (Sheldon Appel, supra,
4
Although the Potters’ res judicata argument also appeared
in the opposition to ECC’s motion for leave to file the first
amended complaint, we cannot assume Swarovski was persuaded
by the argument at that time. The trial court, which could have
denied ECC’s motion on res judicata grounds (Yee v. Mobilehome
Park Rental Review Bd. (1998) 62 Cal.App.4th 1409, 1429),
granted ECC leave to file the first amended complaint.
15
47 Cal.3d at 883) in his deposition, we cannot infer that
Swarovski acted with malice. The primary right theory, central
to the Potters’ res judicata argument, is “notoriously uncertain in
application.” (Baral v. Schnitt (2016) 1 Cal.5th 376, 395.) We do
not assume that every attorney who prosecutes an action based
on a misunderstanding of law does so maliciously. (Sheldon
Appel, supra, at 873 [“While the filing of frivolous lawsuits is
certainly improper and cannot in any way be condoned, in our
view the better means of addressing the problem of unjustified
litigation is through the adoption of measures facilitating the
speedy resolution of the initial lawsuit and authorizing the
imposition of sanctions for frivolous or delaying conduct within
that first action itself, rather than through an expansion of the
opportunities for initiating one or more additional rounds of
malicious prosecution litigation after the first action has been
concluded”].) There is accordingly no adequate showing of malice
on this record.
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DISPOSITION
The order granting Swarovski’s anti-SLAPP motion is
affirmed.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
BAKER, J.
We concur:
RUBIN, P. J.
MOOR, J.
17