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April 17, 2013

Kleveland v. Siegel & Wolensky, LLP, 2013 WL 1632656

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The Fourth District holds a malicious prosecution claim against an attorney is subject to analysis under the anti-SLAPP statute, but the plaintiff met his burden to demonstrate a probability of prevailing on the merits.  The attorney filed and prosecuted a petition in probate court in bad faith to obtain an unequal division of a trust estate.  Further, the Court upheld the trial court’s determination that the anti-SLAPP motion itself was frivolous and filed in bad faith, and found the appeal itself was frivolous.   

Kendall Kleveland became trustee of his parents’ trust after their death.  The assets consisted of a family home and various bank accounts, life insurance, and a debt owed by Kleveland.  Kleveland’s sister Janice requested the family home, but asked to delay any transfer while she investigated the impact of ownership on her public benefits.  The siblings agreed in principle that Kleveland would acquire the liquid assets, and Janice would acquire the house and make an equalizing payment to Kleveland.  Janice moved into the house with her extended family, paid no rent, and failed to take any steps to finalize the division of assets or make an equalizing payment.  Kleveland, believing the matter settled between him and his sister, spent his share of the estate, and did not press Janice for either rent or an equalizing payment. 

After Janice died her son Scott Leach retained Boris Siegel who challenged Kleveland’s draft accounting, demanded detailed documentation of loans between Kleveland and his parents, and precipitously filed a petition against Kleveland for breach of trust and removal as trustee.  Through Siegel, Leach asked to the court to find Kleveland’s opposition to the petition to be in bad faith, for attorney’s fees, costs, double damages, and denial of Kleveland’s fees and costs.  In correspondence to Kleveland’s counsel, Siegel demanded transfer of the family home to Leach without any equalization payment in exchange for dismissing the petition and avoiding the litigation. 

Ultimately Kleveland was completely vindicated in the trial court.  The trial court determined Leach’s petition was filed in bad faith, and Kleveland acted in good faith and reasonably towards Janice.  Although Kleveland had spent the liquid assets prior to final distribution of the estate, this was an innocent mistake caused by Kleveland’s lack of sophistication.  The court concluded it would not be equitable to allow Leach to leverage Kleveland’s innocent mistake into an unequal division of assets.  Leach was ordered to vacate the family home so it could be sold, and to pay Kleveland’s attorney’s fees.   

When Kleveland filed a malicious prosecution action against Siegel and his law firm (Siegel), he filed a special motion to strike the complaint under California’s anti-Strategic Lawsuit Against Public Participation Statute (anti-SLAPP.)  The complaint qualified under the first prong of the anti-SLAPP analysis, because it arose from the exercise of free speech or petition rights. 

However, Kleveland met his burden under the second prong of the analysis because he showed a probability of success on the merits.  In the underlying case Leach was sanctioned for abusive discovery; the litigation lasted for two years ending after a two week trial; and the underlying court concluded the petition was filed and prosecuted in bad faith to leverage Kleveland’s innocent mistake into an unequal division of his parents’ estate.  These findings were affirmed in the Court of Appeal.  The trial court took the unusual step of awarding Kleveland attorney fees and costs as sanctions for an anti-SLAPP motion the court deemed frivolous and intended to harass. 

Siegel contended Kleveland could not demonstrate the malicious prosecution element of a final termination in plaintiff’s favor because the probate court instructed Kleveland to submit further accounting.  This argument ignored the trial court’s statement of decision, final judgment, and the Court of Appeal opinion affirming the judgment.  Siegel cited no authority for his position and ignored the case cited by the trial court which was directly on point. 

Kleveland easily demonstrated a lack of probable cause.  An action lacks probable cause when it is not legally tenable when viewed in an objective manner as of the time the action was initiated or while it was being prosecuted.  It is a question of law calling for an objective standard applied to the facts known to the defendant.  The test is whether any reasonable attorney would have thought the claim tenable.  It includes the continuation of a lawsuit after an attorney discovers it lacks probable cause.  A litigant will lack probable cause if he relies upon facts which he has no reasonable cause to believe to be true, or if he seeks recovery upon a legal theory which is untenable under the facts known to him.  The court construes the allegations of the underlying complaint in a light most favorable to the malicious prosecution defendant.

The trial court found Leach felt entitled to remain in the family home and receive title, an unequal division in direct conflict with the terms of the trust.  Janice’s estate had no ability to make an equalization payment, so Leach sought to use the threat of litigation to achieve his objective.   Siegel was on board with this strategy evidenced by his offer to dismiss the petition if Kleveland relinquished his claim to the family home.   Siegel made unreasonable discovery demands, and failed to negotiate with Kleveland’s counsel prior to filing the petition. 

The Court was not persuaded that Kleveland’s innocent mistake in using what he believed were his portion of the estate assets established probable cause.  Kleveland’s error was not the basis for the petition, which alleged only that Kleveland’s calculation of his debt to the estate was wrong.  Not only had Kleveland provided pre-petition documentation establishing he had calculated the debt correctly, he demonstrated this again both in discovery and at trial. 

The Court also rejected Siegel’s contention the amount of the equalization payment was in dispute and warranted the petition.  Although Leach provided an expert to testify the equalization payment would have been significantly lower than Janice agreed to pay, the probate court gave no weight to her testimony because Leach and Siegel failed to provide her with all relevant information.  The Court of Appeal characterized Siegel’s argument as an unabashed misrepresentation of the record.

There was no probable cause to “discover and adjudicate” the trust division; Leach filed the petition to secure an inequitable settlement, unsupported by law or equity.

The malice element is the defendant’s subjective intent in initiating the prior action.  It does not require actual hostility or ill will; it is present when proceedings are instituted primarily for an improper purpose.  These include proceedings initiated without belief a claim will be valid; initiated primarily because of hostility or ill will; initiated to deprive a litigant of beneficial use of his property; or initiated to force a settlement which has no relation to the merits of the claim.

Kleveland demonstrated malice because the trial court found the petition was filed to force a settlement bearing no relation to the merits of Leach’s claim.  This showing of malice was sufficient to defeat the anti-SLAPP motion.

The Court of Appeal held the sanctions order against Siegel was proper.  The trial court satisfied the requirement that the reason for the sanction be set forth in writing in its minute order.  Siegel was afforded due process when Kleveland requested attorney’s fees and costs as sanctions in his opposition to the motion; no separate notice is required. 

The fact that Siegel’s motion met the first prong of the anti-SLAPP analysis did not save the motion from being frivolous.  It is well accepted that malicious prosecutions are subject to anti-SLAPP motions, but it does not follow that every anti-SLAPP motion brought against a malicious prosecution suit is automatically valid.

The Court of Appeal was so incensed by what it characterized as a frivolous probate petition, anti-SLAPP motion, and appeal, it awarded sanctions against Siegel.  Authority to award sanctions for a frivolous appeal arises only when it is prosecuted for an improper motive, to harass the respondent or delay the effect of an adverse judgment; or when any reasonable attorney would agree the appeal is totally and completely without merit.  Both a subjective and an objective standard are applied.  The subjective standard analyzes the motives of the appealing party and the attorney, while the objective standard analyzes the merits of the appeal from a reasonable person’s perspective.  An honest belief there was grounds for appeal makes no difference if any reasonable attorney would agree the grounds for appeal were totally and completely devoid of merit.  The objective and subjective standards are often used together, one providing evidence of the other. Thus, the total lack of merit of an appeal is viewed as evidence that appellant must have intended it only for delay.

Although sanctions should be used sparingly to deter only the most egregious conduct, the Court of Appeal found them warranted.  Any reasonable attorney would view the appeal as meritless, unsupported by the record, the law, or a belief there were unique issues or reasons for an extension, modification, or reversal of existing law.

Siegel failed to mention the probate court’s finding the petition was filed and pursued in bad faith and for an improper motive, a finding affirmed on appeal.  Siegel’s selected facts ignored the probate court’s evidentiary findings, and required the Court of Appeal to consider evidence rejected by the probate court.  He misrepresented the record and obscured facts.  The Court found by a clear and convincing standard any reasonable attorney would agree the appeal completely lacked merit. 

The Court was dismayed Siegel’s appeal involved seven attorneys and three different law firms, all of whom failed to see the opening brief distorted the record and ignored the trial court’s findings.  This dishonesty was incongruent with an attorney’s statutory duty to employ only means consistent with truth, and never to seek to mislead a court by an artifice or false statement of fact or law.  Other appellants, the appellate system, and the taxpayers are all harmed by a frivolous appeal. 

The Court awarded Kleveland his entire attorney fee incurred in defending the appeal, and assessed sanctions payable to the court in amount based on an estimate of the costs incurred by the court processing the appeal. 

Comment:  There is a balance between a court’s authority to regulate the conduct of attorneys appearing before it, and preservation of an attorney’s ability to zealously litigate on behalf of clients.  It is important the pendulum not swing so far that attorneys become circumspect about pursuing claims or defending clients to avoid sanctions.  It is disturbing a settlement demand could be the basis of a conclusion the attorney sought to force an unequal division of an estate, an issue that is often in the eye of the beholder.  Attorneys should be free to make demands authorized by their clients, without concern that a court looking back with hindsight determines the demand was unreasonable and therefore evidence of a nefarious purpose.   Although Siegel argued the litigation privilege should protect the demand, the court did not address this argument.  This is entirely separate from a brief that misrepresents the record or misstates the law, but even there attorneys should not be stifled from zealous advocacy by threat of sanctions. 




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