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February 11, 2011

Coretronic Corp. v. Cozen O’Connor (2011) 192 Cal.App.4th 1381

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The Second District holds that a case alleging ethical violations was not subject to the anti-SLAPP statute because the gravamen of the claims was unrelated to protected activity.

Coretronic Corporation, Optoma Technology, Inc., and Technical Service Corporation (Coretronic) were sued by E & S International Enterprises, Inc.  (E & S) in a trade dispute.  Coretronic’s carrier, INA, retained Cozen O’Connor (Cozen) to provide an opinion about whether the claims were covered.  Coretronic provided Cozen attorneys with confidential information related to the defense of the E & S action to evaluate coverage.  At the same time, Cozen began representing E & S in a separate lawsuit.  Cozen informed Coretronic when it realized E & S was the same entity in both lawsuits.  Cozen withdrew its representation of E & S, but continued to represent INA.

Coretronic filed an action against Cozen, its individual attorneys, INA, and E & S alleging Cozen’s relationship to E & S was concealed from Coretronic to gain access to its confidential information and benefit E & S.

Cozen filed an anti-Strategic Lawsuit Against Public Participation (anti-SLAPP) motion.  The trial court denied the motion, finding it did not meet the criteria of the statute.  The trial court reasoned Coretronic’s suit was not premised on Cozen’s advice to INA to deny coverage; it was for Cozen’s ethical transgressions.

The Court of Appeal noted an anti-SLAPP motion under Code of Civil Procedure § 425.16 involves a two-step process.  First, the defendant must make a threshold showing that the challenged causes of action arise from protected activity.  The burden shifts to the plaintiff to demonstrate a probability of prevailing on the claims.  The defendant has the burden of making a prima facie showing that one or more causes of action arise from an act in furtherance of the constitutional right of petition or free speech in connection with a public issue.  Neither the merits nor affirmative defenses are relevant to the first prong of the inquiry.

When a lawsuit involves both protected and unprotected activity, the court looks to the gravamen of the claims.  Protected conduct merely incidental to the claims is not within the ambit of § 425.16.  Protected activity that is not the basis of the claims, and will only be used as evidence, is incidental.  This determination requires examination of the specific acts of alleged wrongdoing, not merely the causes of action.

Cozen characterized the claims as arising from protected petitioning activity.  Coretronic countered that the claims arose out of the unprotected activity of Cozen’s dual representation of INA and E & S, and Cozen’s failure to disclose this dual representation while it obtained Coretronic’s confidential defense information of strategic value to E & S.

Cozen pointed out that it had no attorney-client relationship with Coretronic and thus owed it no ethical duty.  The Court of Appeal held this argument conflated the first and second prongs of the anti-SLAPP analysis.  The court was not required to evaluate the merits of Coretronic’s claim when determining if its claims involved protected activity.

The Court distinguished case law where a non-client was subject to the anti-SLAPP statute because the activity was clearly protected petitioning activity and the non-client could not demonstrate, under the second prong, that the activity was illegal.  Here Coretronic denied Cozen’s dual representation was protected petitioning activity.  The complaint was premised on Cozen’s failure to disclose its representation of Coretronic’s adversary while obtaining its confidential information.  The litigation setting was merely incidental to the alleged wrongdoing.

Complaints involving certain ethical violations, even if litigation is a backdrop, do not arise from protected activity.  The protected activity is not the root of the complaint; it is merely the setting in which the claims arise.

Although Coretronic sought to enjoin Cozen’s continued communications with its clients, the remedy sought does not affect whether the claim is based on protected activity.

The Court of Appeal noted that questions of whether the undisclosed representation actually led to damages were not addressed because Cozen did not establish that the claims were premised on protected activity.

Comment: Courts will take a careful look at whether complaints that relate to ethical violations truly pertain to protected conduct.  Note however that the Court did not consider the merits of the case, only whether it was appropriate to apply the anti-SLAPP statute.

 

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