15 Chap. L. Rev. 713 (No PDF)
Chapman Law Review
Winter 2012
Case Digests [tippy title=”*” header=”off”]Chapman Law Review selected these cases primarily for their legal significance. These cases are not exhaustive of the cases decided by the California Supreme Court during this period.[/tippy]
DIGEST: OASIS WEST REALTY, LLC V. GOLDMAN
Lindzey Schindler
Copyright (c) 2012 Chapman Law Review; Lindzey Schindler
Opinion by Baxter, J., with Cantil-Sakauye, C.J., Werdegar, J., Chin, J., and Corrigan, J. Concurring Opinion by Kennard, J., with Todd, J.
Issue
Does a former client’s action against an attorney for breach of fiduciary duty possess at least minimal merit within the meaning of an anti-strategic lawsuit against public participation (anti-SLAPP) motion, when the attorney campaigned and solicited signatures for a petition to overturn approval of the precise project for which he had formerly represented the client?
Facts
In early 2004, Oasis West Realty, LLC retained Attorney Kenneth A. Goldman and his law firm, Reed Smith, LLP, to provide legal services in connection with a plan to redevelop and revitalize land Oasis owned in Beverly Hills (City). [tippy title=”1″ header=”off”]Oasis West Realty, LLC v. Goldman, 250 P.3d 1115, 1117 (Cal. 2011) .[/tippy] The project, referred to as the Hilton Project, required the approval of the Beverly Hills City Council, and Oasis hired Goldman specifically for his knowledge in civic matters and the respect and influence he garnered from actively participating in Beverly Hills politics. [tippy title=”2″ header=”off”]Id.[/tippy] Over the course of the next two years, Goldman became closely involved in the development of the plan for Oasis’ project, including its strategy for securing entitlements from the city and approval from the residents of Beverly Hills. [tippy title=”3″ header=”off”]Id. at 1118.[/tippy] However, in April 2006, Goldman removed himself and Reed Smith from representing Oasis on the Hilton Project. [tippy title=”4″ header=”off”]Id.[/tippy]
In June 2006, Oasis’ development proposal was presented to the City Council, and in April 2008 after two years of intensive review, the council certified the necessary Environmental Impact Report and general and specific plan resolutions, which allowed for final approval of the project. [tippy title=”5″ header=”off”]Id.[/tippy] Soon after, a group of the City’s residents who were opposed to the redevelopment plan proposed by Oasis formed the Citizens Right to Decide Committee with the objective of putting a referendum on the ballot allowing voters to overturn the Hilton Project (Measure H). [tippy title=”6″ header=”off”]Id.[/tippy]
In May 2008, as later confirmed in his own affidavit, Goldman and his wife wrote a letter and successfully solicited neighbors for signatures to get Measure H on the November ballot. [tippy title=”7″ header=”off”]Id.[/tippy] Later that month, Oasis sent a letter to Reed Smith criticizing Goldman’s conduct as a violation of the fiduciary duty owed to it and consequently demanding that Goldman and the firm cease from participating in any activities harmful to the Hilton Project. [tippy title=”8″ header=”off”]Id. at 1119.[/tippy] Despite the firm’s same-day response in which it agreed not to take part in matters regarding the petition, the citizens’ committee gathered enough signatures to put Measure H on the ballot. [tippy title=”9″ header=”off”]Id.[/tippy] The measure, ratifying the city council’s decision, passed in November 2008. [tippy title=”10″ header=”off”]Id.[/tippy]
In January 2009, Oasis filed a lawsuit against Goldman and Reed Smith for breach of fiduciary duty, professional negligence, and breach of contract, seeking millions in damages. [tippy title=”11″ header=”off”]Id.[/tippy] Defendants filed a special motion to strike under the anti-SLAPP statute, section 425.16 of the California Code of Civil Procedure, [tippy title=”12″ header=”off”]Id. SLAPP is an acronym for “strategic lawsuit against public participation.” Id. at 1117 n.1.[/tippy] which the trial court denied, finding that the “gravamen” of the causes of action were not against Goldman’s petitioning, but against his breach of duties of loyalty and confidentiality to Oasis as a former client. [tippy title=”13″ header=”off”]Id. at 1119.[/tippy] The court of appeal reversed, finding that the cause of action must have been against Goldman’s petitioning since Goldman: (1) had not entered into a second attorney-client relationship with an adverse interest toward Oasis, (2) no longer represented Oasis as a current client, and (3) had not disclosed confidential information acquired when Oasis was Goldman’s client, and that the anti-SLAPP motion therefore should be allowed. [tippy title=”14″ header=”off”]Id. at 1120.[/tippy] The California Supreme Court granted review. [tippy title=”15″ header=”off”]Id. at 1115.[/tippy]
Analysis
The court laid out the language of section 425.16(b)(1), which states:
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 the 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. [tippy title=”16″ header=”off”]Id. at 1120 (quoting Cal. Civ. Proc. Code §425.16(b)(1) (West 2004)).[/tippy]
The court explained that the analysis of an anti-SLAPP motion is two-fold: first the defendant must make a showing that “the challenged cause of action is one ‘arising from’ protected activity.” [tippy title=”17″ header=”off”]Id.[/tippy] If the court finds the defendant is successful in doing so, the plaintiff must then demonstrate “a probability of prevailing on the claim.” [tippy title=”18″ header=”off”]Id.[/tippy] The court decided to forego analysis under the first prong of the test in this case because it reasoned the plaintiff successfully met the requirements of the second prong of the test. [tippy title=”19″ header=”off”]Id.[/tippy]
To meet the requirements of the second prong of analysis when responding to an anti-SLAPP motion, the plaintiff must show “a probability of prevailing on any part of its claim,” thereby allowing the plaintiff’s action to stand. [tippy title=”20″ header=”off”]Id.[/tippy] While Oasis had asserted three causes of action (breach of fiduciary duty, professional negligence, and breach of contract) against Goldman, the court decided to focus on the alleged breach of fiduciary duty, the elements of which are: (1) the existence of the fiduciary relationship; (2) breach of the fiduciary duty; and (3) resultant damages. [tippy title=”21″ header=”off”]Id. at 1120-21.[/tippy] Goldman was Oasis’s lawyer, thus creating a fiduciary duty–a duty that includes obligations of loyalty and confidentiality. [tippy title=”22″ header=”off”]Id. at 1121.[/tippy] Oasis asserted Goldman breached this duty by taking “confidential and sensitive” information he acquired during his representation of Oasis regarding the Hilton Project, and using that information to oppose that very project. [tippy title=”23″ header=”off”]Id.[/tippy] Finally, Oasis claimed it spent $3000 in fees to investigate Goldman’s actions and to write a letter demanding Goldman cease his petitioning activities, thereby incurring damages. [tippy title=”24″ header=”off”]Id. at 1122.[/tippy] The court then concluded Oasis would probably prevail on each of its causes of action. [tippy title=”25″ header=”off”]Id.[/tippy]
The defendants asserted various arguments as to why the plaintiff’s claim was not sufficient to establish that a fiduciary duty existed between Oasis and Goldman, or that the duty was breached had one existed, but the court did not find merit in any of these contentions. [tippy title=”26″ header=”off”]See id.[/tippy] First they argued that a breach of a lawyer’s fiduciary duty should only be applied in cases where the lawyer has taken on a concurrent or successive client on a substantially related matter that is adverse to the former client of prior representation, or in a case where the attorney has revealed confidential information. [tippy title=”27″ header=”off”]Id. (citing Wutchumna Water Co. v. Bailey, 15 P.2d 505, 508 (Cal. 1932) ).[/tippy] But the court decided that neither the defendants, nor the court of appeal who agreed with the defendants on this point, supplied justification for limiting an attorney’s fiduciary duties to a former client so narrowly. [tippy title=”28″ header=”off”]Id.[/tippy] Attorneys are not relieved of their fiduciary duties to preserve client’s confidential information even in regard to public issues, nor may they abuse the trust of a former client by revealing information gained during representation. [tippy title=”29″ header=”off”]Id. at 1122-23 (citing Restatement (Third) Law Governing Lawyers §125 cmt. e, §33(2) (2000)).[/tippy]
Defendants next argued that a bar on attorney speech would lead courts down a slippery slope, eventually limiting attorneys from secretly voting in ballots against interests of former clients. [tippy title=”30″ header=”off”]Id. at 1123-24.[/tippy] The court found this argument unpersuasive as well, by doubting the significant adverse impact a single vote would have in an anonymous ballot and by reiterating that it was only deciding whether Oasis’ cause of action had minimal merit within the second prong of the anti-SLAPP test analysis, not placing a broad bar on attorney speech or actions. [tippy title=”31″ header=”off”]Id. at 1124.[/tippy] The court therefore also dismissed the defendant’s First Amendment argument since the court was not instating a ban on attorney speech, being sure to assert that even if the First Amendment argument had been relevant, the amendment would not have protected the attorney’s disclosure of confidential client information, for which the plaintiff had made a prima facie case. [tippy title=”32″ header=”off”]Id.[/tippy]
Finally, the court concluded that the plaintiff had made a prima facie case of actual injury since Oasis incurred $3000 in lawyer’s fees while trying to make Goldman cease his adverse activities against the Hilton Project. [tippy title=”33″ header=”off”]Id. at 1124-25.[/tippy] Since expenses sustained from hiring an attorney to mitigate the negligence of a client’s former attorney are recoverable damages, [tippy title=”34″ header=”off”]Id. at 1125.[/tippy] Oasis met the third element needed to establish a breach of fiduciary duty. [tippy title=”35″ header=”off”]Id.[/tippy] Based on the foregoing, the court concluded that Oasis’ claim of breach of fiduciary duty met the minimal merit requirement of the second prong of the anti-SLAPP statute. [tippy title=”36″ header=”off”]Id.[/tippy]
Holding
The court reversed the court of appeal. [tippy title=”37″ header=”off”]Id.[/tippy] The court held that the plaintiff satisfied the second prong of the anti-SLAPP statute by demonstrating a probability of prevailing on the merits of its breach of fiduciary duty action against its former attorney who petitioned against the precise subject of former representation, and thusly, that the defendant’s anti-SLAPP motion should be denied. [tippy title=”38″ header=”off”]Id.[/tippy]
Concurrence
Justice Kennard, joined by Justice Todd, concurred in the judgment that Oasis satisfied the second prong of the anti-SLAPP test by demonstrating it would probably prevail on its claims. [tippy title=”39″ header=”off”]Id. (Kennard, J., concurring).[/tippy] However, Justice Kennard did not agree with the court that it could ignore the first prong of the anti-SLAPP analysis and simply consider the second step. [tippy title=”40″ header=”off”]Id. at 1125-26.[/tippy]
Justice Kennard explained that Goldman easily met the requirement of the first prong of the test, which required a showing that Oasis’ action was based on Goldman’s “exercise of his constitutional right to free speech in connection with a public issue.” [tippy title=”41″ header=”off”]Id.[/tippy] Goldman’s actions of petitioning and collecting signatures against the Hilton Project easily fit into the category of free speech in connection with a public issue, thereby satisfying the first prong of an anti-SLAPP motion, despite the restriction on his rights to free speech insomuch as it was adverse toward the matter in which he had represented his former client. [tippy title=”42″ header=”off”]Id.[/tippy] Regardless of Goldman demonstrating the existence of a legitimate issue as to whether his petition activity was constitutionally protected, Justice Kennard agreed with the majority that Oasis had shown a probability of prevailing, and therefore concurred that the trial court was correct to deny Goldman’s anti-SLAPP motion. [tippy title=”43″ header=”off”]Id.[/tippy]
Legal Significance
The court broadened the ethical liability of a lawyer’s actions beyond that of subsequent employment or breaches of current-client fiduciary duties to include acts an attorney makes on his own behalf after severing a client relationship, insofar as they substantially adversely affect a specific matter of prior representation. The court also suggests through its actions that if a plaintiff can successfully demonstrate the requirements of the second prong of the anti-SLAPP test, in that their cause of action has at least minimal merit, the first prong of whether the defendant’s acts are even protected under the SLAPP statute may be irrelevant and will not necessarily be considered in the court’s decision on whether to allow an anti-SLAPP motion.