Thursday, June 4, 2015

"A Fight to the Death Litigation Struggle" (and also a SLAPP)

Bergstein v. Stroock & Stroock & Lavan LLP, No B244896 (D2d8 May 8, 2015)

This is the apparent end of one of the many rounds of ugly litigation in various courts arising from a dispute between movie producer and Hollywood businessman David Bergstein and Aramid Entertainment, a film finance hedge fund. The blow-by-blow of what plaintiff calls
a fight to the death litigation struggle is way too much to recount here. But the pertinent part of the story is that Susan Tregub, Bergstein’s long-time personal lawyer, with whom he had a falling out over fees, supposedly leaked Bergstein’s privileged and confidential information to Aramid and its lawyers. Bergstein won a $50 million breach of fiduciary duty verdict against Tregub. Then, in this case, he sued the lawyers representing Aramid on the litigation side—lawyers who were supposedly on the receiving end of the leaked info and used it in the various litigations. The trial court granted the lawyers’ anti-SLAPP motions.

The appeal addresses three principal issues. First, were the lawyers’ actions illegal as a matter of law, and thus per se outside of the anti-SLAPP statute under Flatley v. Mauro, 39 Cal. 4th 299 (2006). Second, did the conduct in the complaint arise from protected activity. And third, could Bergstein show a likelihood of success on the merits.

As to the Flatley exception, Bergstein claimed that the evidence showed that the lawyers’ aided and abetted Tregub’s violations of Business & Professions Code § 6068(e), which requires an attorney to maintain her client’s confidences at every peril to herself. The court rejects the argument. When the Supreme Court in Flatley spoke of “illegality,” it was talking about criminal conduct. (Flatley involved extortion.) Numerous cases decided since Flatley have specifically explained that the narrow exception does not apply to civil violations of statutes or the common law. Otherwise the exception would eat the rule, since every lawsuit alleges the violation of some legal rule.

The second issue is one that we have addressed many times: when a claim arises from acts in aid of litigation—such as the gathering of evidence—does it “arise from” activity protected by Code of Civil Procedure § 425.16(e)(4)? The cases on this issue are all over the map. But Bergstien didn’t do himself any favors by alleging in his complaint—quite vigorously—that this was all part of a seamless plot to foment baseless litigation against him. 

That makes this case look a lot like Peregrine Funding, Inc. v. Sheppard Mullin Richter & Hampton LLP, 133 Cal. App. 4th 658 (2005), where the court found that a fiduciary duty claim based on ginning up some meritless bankruptcy litigation arose in significant part from activity protected under § 425.16(e)(4). A more artfully pleaded complaint might have focused more on just the receipt of the privileged and confidential info. That would have had a better chance of survival because it could have been analogized to other cases that decline to protect wiretapping and other black ops in the gathering of evidence, like Renewable Res. Coal., Inc. v. Pebble Mines Corp., 218 Cal.App.4th 384 (2013) (bribery), Malin v. Singer, 217 Cal. App. 4th 1283, 1302 (2013) (wiretapping and computer hacking), and Gerbosi v. Gaims, Weil, West & Epstein, LLP, 193 Cal. App. 4th 435, 446 (2011) (wiretapping). By being over the top, plaintiff appears to have made the court’s job easy.

A similar issue comes up in the merits. Due to the complaint’s focus on the use of the information in other litigations, Bergstein walks into the litigation privilege in Civil Code § 47(b). The court finds that the complaint alleges either communications in court proceedings or communications in anticipation of them. Thus, the claims are barred under § 47(b).

The court also finds in the alternative that the case—filed two years after the events occurred—is barred by the statute of limitations in Code of Civil Procedure § 340.6, which applies to “[a]n action against an attorney for a wrongful act or omission, other than for actual fraud, arising in the performance of professional services.” Whether this provision applies outside of malpractice is the subject of a split of authority over which the Supreme Court granted review in the Lee case. But the court here takes the broader, more liberal reading, holding that § 340.6’s two-year period applies to any tort claim against lawyers involving the performance of professional services. Here, the claims were more than two years old at the time of filing, and Bergstein didn’t come forward with evidence that would warrant tolling. So they were also time barred.


Correction: Post corrected to fix some incorrectly numbered statutes.

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