Opinion
D071043
03-29-2018
DAVID A. BLACKBURN et al., Plaintiffs and Appellants, v. CATHERINE HERRICK, Individually and as Trustee, etc. et al., Defendants and Appellants; DAVID HAYEK, Defendant and Respondent.
Vivoli Saccuzzo, Michael W. Vivoli and Jason P. Saccuzzo for Plaintiffs and Appellants David A. Blackburn et al. Law Office of Joseph A. Lara and Joseph Alan Lara for Defendants and Appellants Catherine Herrick et al. Lowell Robert Fuselier, in pro. per., and for Defendant and Appellant Kaloogian & Fuselier. Law Office of Robert Newman, Robert Newman and Tami Kay Lee for Defendant and Respondent David Hayek. Law Office of George Rikos and George Rikos for Defendant and Respondent Bart Blechschmidt.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 37-2016-00008694-CU-PN-CTL) APPEAL from orders of the Superior Court of San Diego County, Richard E. L. Strauss, Judge. Affirmed. Vivoli Saccuzzo, Michael W. Vivoli and Jason P. Saccuzzo for Plaintiffs and Appellants David A. Blackburn et al. Law Office of Joseph A. Lara and Joseph Alan Lara for Defendants and Appellants Catherine Herrick et al. Lowell Robert Fuselier, in pro. per., and for Defendant and Appellant Kaloogian & Fuselier. Law Office of Robert Newman, Robert Newman and Tami Kay Lee for Defendant and Respondent David Hayek. Law Office of George Rikos and George Rikos for Defendant and Respondent Bart Blechschmidt.
This appeal arises out of a convoluted set of facts, as malicious prosecution actions often do. The underlying suit, brought by Catherine Herrick as cotrustee of her late father's trust, was based on an alleged loan secured by an apartment complex. The trust claimed that the borrower was delinquent in payments and fraudulently transferred the apartment complex to avoid its obligation. It sued the buyer of the apartment property—or rather, three parties it suspected were the buyers—too. The trust lost.
Because multiple individuals bearing the surname Herrick are relevant to this appeal, we refer to them initially by their first and last names and thereafter by their first names only.
Based on that action, the purported buyers sued Catherine and the trust's attorneys for malicious prosecution. But the malicious prosecution action was short lived. It did not survive the various defendants' anti-SLAPP motions—which are now before us on appeal.
We affirm the orders in favor of Catherine and the trust attorneys. In reaching our conclusion, we navigate through several bodies of law. First, we turn to the legal requirements for the second step of the anti-SLAPP review. That framework directs us to consider the merits of plaintiffs' claim for malicious prosecution. The probable cause element of a malicious prosecution cause of action requires that a claim in the underlying action lacked minimal factual or legal tenability. We must thus turn to the substantive law governing the claims in the underlying action. Following our survey of these various legal principles, we conclude that plaintiffs failed to establish a prima facie case (as required to defeat an anti-SLAPP motion at the second step) that any of the theories pursued in the underlying action lacked probable cause (as required for a successful malicious prosecution claim).
We also review the trial court's rulings regarding some of the attorney fees requested by defendants in connection with their anti-SLAPP motions. The court concluded that the trust's law firm and one of its attorneys could not recover for work done by their of counsel. It also awarded Catherine less fees than she sought. Under the applicable standards of review, no reversible error appears with respect to any of the issues raised. Accordingly, we affirm that ruling as well.
FACTUAL AND PROCEDURAL BACKGROUND
In early 2006, business partners A. Leon Herrick and Robert K. Lane formed San Diego Properties Acquisition and Development, LLC (the Company), which they used to acquire the Bella Villagio apartment complex. The Company financed the Bella Villagio's acquisition through multiple sources. It obtained a first deed of trust and note from a bank and a second from the Lantzman Family Trust (the Lantzman note). The Lantzman note was cross-collateralized on another property owned by Leon, known as Beaumanor. Contributions from individual investors, including Leon and Lane, covered the balance.
Eventually Leon needed to refinance Beaumanor to access additional capital. To do so, he retired the Lantzman note—clearing the Company's obligation with respect to the Bella Villagio as supposedly a mere "incidental effect"—and obtained a new bank loan secured only on Beaumanor. The Company "help[ed] out" by paying some of the interest on Leon's new loan directly to the lender.
Leon's newfound liquidity, however, apparently did not last. He filed for Chapter 11 bankruptcy in late 2009. According to Lane, in order to establish sufficient assets for reorganization Leon and his daughter (Catherine) "cooked up" a theory that Leon lent proceeds from his new Beaumanor loan to the Company, which in turn used the funds to pay off the note. As evidence of the loan, Leon and Catherine pointed to, among other things, financial statements related to the Bella Villagio that referenced the loan. They also relied on a letter from Lane to the bankruptcy examiner stating that "[Leon] holds a priority position behind the 1st and 2nd Trust Deeds on [the Bella Villagio] in the amount of [$]1,881,000 which will be paid upon sale." The bankruptcy examiner's final report concluded, "The documentation provided indicates that the $1,881,000 receivable due to [Leon] from [the Company] is valid, though the only terms [sic] that are documented is that [Leon] would receive payment once the Bella Villagio property is sold." The proceeding was eventually dismissed voluntarily.
About two years later, Leon assigned his right to repayment under the purported loan, then valued at $1,891,849, to the Herrick Family Trust (the Trust). He passed away the following month.
Thereafter, Leon's daughters (Catherine and Penny Herrick Dressler), as cotrustees of the Trust, sued the Company and Lane based on the failure to make payments on the alleged loan. They recorded a lis pendens on the Bella Villagio property in connection with the suit.
The Company moved for expungement of the lis pendens the next year. In support of expungement, Lane declared that Leon paid off the Lantzman note "only to benefit himself" and that "[n]ot one penny of the money from the Beaumanor refinance went into any bank account of [the Company]." The court granted the motion to expunge, reasoning that (1) "[the Trust's] operative complaint fail[ed] to plead a real property claim against defendant," as required for a lis pendens (see Code Civ. Proc., § 405.31) and (2), even assuming there was a real property claim, the Trust did not establish the requisite "probable validity" of the claim (see id., § 405.32).
In the meantime, the condition of the Bella Villagio apartments deteriorated. Leon and Lane originally acquired the property with aspirations to create a condominium complex. But a legislative moratorium on condominium conversions foiled their plans. Instead of a condominium, the property became more of a tenement, overrun with drug dealers and rent-delinquent inhabitants.
Shortly after the expungement was ordered, David A. Blackburn learned of the Bella Villagio's decline and became interested in obtaining and rehabilitating the property. He also discovered that the lis pendens had been expunged. Seeing an opportunity to purchase "a distressed asset at a discount," Blackburn made an offer and ultimately agreed to purchase the property for $4.5 million. Under the purchase agreement, Blackburn or his assignee would take the property subject to two secured loans—both of which were in arrears—and pay the defaulted property taxes. The Company would receive $200,000 from the sale. Before the close of escrow, Blackburn assigned his rights under the purchase agreement to Graves Ave., LLC (Graves), an entity that he created to hold the property.
After the deal closed, the $200,000 earmarked for the Company was eaten up by credits back to the buyer (Graves) in light of issues with the property. More problems materialized. Two secured lenders had never consented to the sale, and upon completion of the transfer, one tried to foreclose on the property. Blackburn incurred significant fees remedying the default. Yet, despite the initial issues, Blackburn's investment choice apparently panned out: He eventually sold the property for nearly twice his purchase price.
Once Catherine learned of the sale to Graves, the Trust sought to (and did) depose Blackburn in connection with the pending suit against the Company. Following the deposition, the Trust was granted leave to amend its complaint to add Blackburn (individually and in his capacity as trustee of the Blackburn Family Trust) and Graves as parties (collectively, the Blackburn Parties). Two causes of action were brought against the Blackburn Parties: violation of the former Uniform Fraudulent Transfer Act (UFTA) and aiding/abetting a violation of the same. The UFTA cause of action did not specify whether the theory of fraudulent transfer was actual (former Civ. Code, § 3439.04, subd. (a)(1)) or constructive (§ 3439.04, subd. (a)(2), 3439.05); the complaint included allegations relevant to each theory. The Trust later abandoned its aiding/abetting cause of action and its actual fraudulent transfer theory (i.e., under former Civ. Code, § 3439.04, subd. (a)(1)), leaving constructive fraudulent transfer as the only claim against the Blackburn Parties.
After judgment was entered in the underlying suit, the UFTA was revised and renamed the Uniform Voidable Transaction Act. (Stats. 2015, ch. 44, §§ 2-3, eff. Jan. 1, 2016.) We refer to it as the UFTA to avoid confusion. (See PGA West Residential Association, Inc. v. Hulven International, Inc. (2017) 14 Cal.App.5th 156, 162, fn. 2.)
Unless otherwise indicated, further statutory references are to the Civil Code and, more specifically with respect to the UFTA, to the version in effect until January 1, 2016. (See fn. 2, ante.)
The case proceeded to trial. Via a special verdict form, the jury found there was no oral contract between Leon and the Company. Because there was no oral contract creating a loan from Leon (and consequentially the Trust) to the Company, the jury did not reach any of the other questions on the special verdict form—all of which were contingent on the existence of the loan. Judgment was entered in favor of the Company and the Blackburn Parties.
In exchange for a waiver of costs, the Trust dismissed its claims against Lane with prejudice before trial.
Based on that lawsuit, the Blackburn Parties filed this action for malicious prosecution against Catherine individually and in her capacity as trustee of the Trust, as well as the law firm (Kaloogian & Fuselier, LLP) and three attorneys (Robert Lowell Fuselier, Bart Blechschmidt, and David Hayek) that represented the Trust in the underlying action. (We refer to the malicious prosecution defendants—all of whom are party to this appeal—collectively as the Trust Parties.)
Catherine, Fuselier, and Kaloogian & Fuselier, LLP were the first to file an anti-SLAPP motion in response. (Code Civ. Proc., § 425.16.) Blechschmidt's own motion came shortly after. Following the Blackburn Parties' combined opposition to the two pending anti-SLAPP motion, the court granted each by July 15, 2016 order. Almost precisely one month later, Hayek filed his own anti-SLAPP motion, which the Blackburn Parties also opposed. In a September 23, 2016 order, the trial court granted Hayek's motion and ruled on Catherine, Fuselier, and Kaloogian & Fuselier, LLP's joint request for attorney fees and costs. It awarded Blechschmidt and Hayek fees by later orders. (Code Civ. Proc., § 425.16, subd. (c)(1).)
Multiple notices of appeal followed. The Blackburn Parties appeal from the July 15, 2016 and September 23, 2016 orders granting the various anti-SLAPP motions. Catherine appeals from the September 23, 2016 order as it pertains to the issue of attorney fees. Fuselier and the law firm also appeal from the same attorney fee order.
The Blackburn Parties notice of appeal as to the first anti-SLAPP ruling was mistakenly filed as an appeal from the ensuing judgment of dismissal dated August 3, 2016. An order granting or denying an anti-SLAPP motion is independently appealable (Code Civ. Proc., §§ 425.16, subd. (i), 904.1, subd. (a)(13)), and thus "we are foreclosed from reviewing that order on appeal from the judgment." (Maughan v. Google Technology, Inc. (2006) 143 Cal.App.4th 1242, 1247.) However, we must construe a notice of appeal liberally. (Cal. Rules of Court, rule 8.104(a)(2); Luz v. Lopes (1960) 55 Cal.2d 54, 59 ["notices of appeal are to be liberally construed so as to protect the right of appeal if it is reasonably clear what appellant was trying to appeal from, and where the respondent could not possibly have been misled or prejudiced"].) It is reasonably clear that the appeal was intended to challenge the July 15, 2016 order, and it would have been timely as to that order. Accordingly, we construe it as properly brought from the July 15, 2016 order.
DISCUSSION
1. The Anti-SLAPP Motion
We first turn to the Blackburn Parties' appeal as to the granting of the various anti-SLAPP motions. We review the ruling de novo. (Park v. Board of Trustees of California State University (2017) 2 Cal.5th 1057, 1067.)
Blechschmidt failed to file a respondent's brief. Accordingly, we decide the appeal as to him based on the record and the Blackburn Parties' opening brief. (Cal. Rules of Court, rule 8.220(a)(2).) As it turns out, this limitation does not result in an outcome different from the other respondents'.
The two-step procedure for resolving an anti-SLAPP motion is well-established. "First, the defendant must establish that the challenged claim arises from activity protected by [Code of Civil Procedure] section 425.16." (Baral v. Schnitt (2016) 1 Cal.5th 376, 384 (Baral).) The parties do not dispute that the Blackburn Parties' malicious prosecution claim satisfies that requirement. (See, e.g., Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 732.) Thus, only the second step is at issue here.
In the second step, "the burden shifts to the plaintiff to demonstrate the merit of the claim by establishing a probability of success." (Baral, supra, 1 Cal.5th at p. 384.) The analysis involves a " 'summary-judgment-like procedure.' " (Ibid.) The court inquires "whether the plaintiff has stated a legally sufficient claim and made a prima facie factual showing sufficient to sustain a favorable judgment." (Id. at p. 385.) We "do[] not weigh evidence or resolve conflicting factual claims." (Ibid.) Instead, we accept the plaintiff's admissible evidence as true and "evaluate[] the defendant's showing only to determine if it defeats the plaintiff's claim as a matter of law." (Ibid.; Okorie v. Los Angeles Unified School District (2017) 14 Cal.App.5th 574, 591.)
In evaluating whether the Blackburn Parties have established " 'the requisite minimal merit' " of their claims (Baral, supra, 1 Cal.5th at p. 385), we must look to the substantive law underpinning their action. To prevail on a malicious prosecution cause of action, the plaintiff must "demonstrate (1) the defendant brought (or continued to pursue) a claim in the underlying action without objective probable cause, (2) the claim was pursued by the defendant with subjective malice, and (3) the underlying action was ultimately resolved in the plaintiff's favor." (Lane v. Bell (2018) 20 Cal.App.5th 61, 67.) A failure to establish any of the three elements dooms the plaintiff's claim. (Ibid.) Because the Blackburn Parties fail to establish a likelihood of success with respect to the probable cause element, we affirm the grant of the anti-SLAPP motions without considering their showings as to the other two elements.
" '[T]he probable cause element calls on the trial court to make an objective determination of the "reasonableness" of the defendant's conduct, i.e., to determine whether, on the basis of the facts known to the defendant, the institution of the prior action was legally tenable,' as opposed to whether the litigant subjectively believed the claim was tenable. [Citation.] A claim is unsupported by probable cause only if ' " 'any reasonable attorney would agree [that it is] totally and completely without merit.' " ' [Citations.] 'This rather lenient standard for bringing an action reflects "the important public policy of avoiding the chilling of novel or debatable legal claims." ' [Citation.] The standard safeguards the right of both attorneys and their clients ' " 'to present issues that are arguably correct, even if it is extremely unlikely that they will win.' " ' [Citation.]" (Parrish v. Latham & Watkins (2017) 3 Cal.5th 767, 776 (Parrish).)
Each theory in the underlying action must be supported by probable cause. (Bertero v. National General Corp. (1974) 13 Cal.3d 43, 57; Crowley v. Kattleman (1994) 8 Cal.4th 666, 678.) Thus, we consider whether the Blackburn Parties make a prima facie showing that any of the theories underpinning the Trust's causes of action lacked probable cause. This requires us to turn to yet another body of substantive law—i.e., the law underlying the Trust's causes of action for fraudulent transfer and aiding/abetting such transfers.
"A fraudulent conveyance is 'a transfer by the debtor of property to a third person undertaken with intent to prevent a creditor from reaching that interest to satisfy its claim.' " (Nautilus, Inc. v. Chao Chen Yang (2017) 11 Cal.App.5th 33, 39.) The Uniform Fraudulent Transfer Act renders certain transfers by debtors voidable as to an injured creditor. (See Mehrtash v. Mehrtash (2001) 93 Cal.App.4th 75, 80 [injury required].) These include cases of actual fraudulent conveyance—i.e., where "the debtor made the transfer or incurred the obligation . . . [w]ith actual intent to hinder, delay, or defraud" the creditor. (§ 3439.04, subd. (a)(1); Hasso v. Hapke (2014) 227 Cal.App.4th 107, 122 (Hasso).) Also included are cases of constructive fraudulent conveyance—i.e., where "the debtor made the transfer or incurred the obligation . . . [w]ithout receiving a reasonably equivalent value in exchange" and either (i) had too few assets to continue business or debts exceeding its ability to pay (§ 3439.04, subd. (a)(2)) or (ii) was insolvent at the time of the transfer or became insolvent as a result (§ 3439.05). (Hasso, at p. 122.)
See footnote 2, ante.
Recovery pursuant to section 3439.05, as opposed to section 3439.04, is only available to "a creditor whose claim arose before the transfer was made or the obligation was incurred."
There are several possible remedies for a successful UFTA claim, including a money judgment "for an amount equal to the value of the asset at the time of the transfer, subject to adjustment as the equities require." (§ 3439.08, subds. (b), (c).) There are also several possible parties against whom relief may be sought, including a transferee. (Id., subd. (b).) A creditor bringing an actual fraudulent transfer claim under section 3439.04, subdivision (a)(1) cannot, however, recover against a transferee who took in good faith and for reasonably equivalent value. (§ 3439.08, subd. (a).)
As a threshold matter, each of the Trust's claims required probable cause that it was indeed a creditor of the Company—in other words, probable cause that the purported loan was real. According to the Blackburn Parties, no such probable cause existed in light of the dearth of admissible evidence supporting the loan and the presence of evidence indicating that it was a sham. They primarily rely on Lane's story that the loan was "cooked up" for Leon's bankruptcy proceeding. They also point to allegedly corroborative statements from the Company's bookkeeper.
The Trust Parties counter by pointing to evidence indicating the loan's existence, including Lane's letter to the bankruptcy examiner referencing the loan and the Company's balance sheets reflecting it as a long-term liability. Nonetheless, since we must accept the plaintiff's evidence as true for purposes of an anti-SLAPP motion (Baral, supra, 1 Cal.5th at p. 385), the Blackburn Parties reason that we must reject any conflicting evidence proffered by the Trust Parties.
Yet, while the Blackburn Parties are correct about the legal standards underpinning an anti-SLAPP review, there is no conflict in the evidence here that necessitates our rejection of opposing evidence. This is not a case like Greene v. Bank of America (2013) 216 Cal.App.4th 454, upon which the Blackburn Parties rely heavily. There, given the parties' conflicting stories, one had to be lying; if the falsity was attributable to the malicious prosecution defendant, no probable cause existed. (Id. at p. 464.) Here, in contrast, the parties' evidence can coexist. Crediting Lane's testimony that the loan documents were "cooked up" does not require disbelieving the documents' existence or concluding that the Trust Parties are lying. Lane's testimony is but one possible explanation for the documentation. And the documents' presence establishes the minimal factual tenability required for probable cause, even though Lane's story might serve as a counterweight in the ultimate determination of the loan's validity. (See Wilson v. Parker, Covert & Chidester (2002) 28 Cal.4th 811, 822 ["A litigant or attorney who possesses competent evidence to substantiate a legally cognizable claim for relief does not act tortiously by bringing the claim, even if also aware of evidence that will weigh against the claim"].)
The Blackburn Parties argue next that, even assuming there was sufficient indicia that the loan existed, no probable cause supported the Trust Parties' actual fraudulent conveyance theory because "no facts even remotely suggest[ed] that Blackburn was motivated to proceed with the transaction in order to 'defraud' the [Trust]." (Italics added.) Their argument misses the mark. Blackburn's intent is not implicated by section 3439.04, subdivision (a)(1); that section looks to whether "the debtor made the transfer . . . [w]ith actual intent to hinder, delay, or defraud any creditor of the debtor." (Id., italics added.) Assuming he was a transferee, Blackburn's intent mattered insofar as a section 3439.08, subdivision (b) good faith defense was raised. But the Company's intent is relevant to the Trust's affirmative case for intentional fraudulent conveyance. And the Blackburn Parties make no arguments and offer no evidence specific to whether there was a lack of probable cause as to the Company's intent. Thus, they fail to meet their burden with respect to this theory.
As to the constructive fraudulent transfer theory, the Blackburn Parties argue briefly that the Trust lacked probable cause that less than reasonably equivalent value was paid for the Bella Villagio. (See §§ 3439.04, subd. (a)(2), 3439.05.) They mainly take issue with the fact that the Trust "first" learned its valuation expert's opinion regarding the Bella Villagio's retrospective worth over a year after the claims against the Blackburn Parties were filed. But that does not mean that the action was instituted without probable cause; it simply indicates that the Trust was continuing to build its case.
Beyond the timing of the expert's opinion, the Blackburn Parties point to other evidence purportedly showing that Blackburn paid "reasonably equivalent value" for the property, including the property's deterioration, an offer Catherine at one point made to purchase it, and their own expert's opinion. Their showing, however, does not indicate a lack of probable cause. To the contrary, the differing expert opinions here indicate the minimal necessary factual tenability for probable cause.
Blackburn separately argues that no fraudulent transfer claim—constructive or actual—could lie against him since he transferred the right to purchase the Bella Villagio to Graves before escrow closed. That is, he argues that he was never a transferee within the meaning of the UFTA. The Trust Parties respond with two theories as to why Blackburn would have been a transferee. First, they point out that, despite Blackburn's deposition testimony, his name appeared on the original grant deed and was only later whited-out by the escrow agent. Alternatively, they posit that Blackburn could have been liable under an alter ego theory since he was the sole human being in complete control of Graves. (See Troyk v. Farmers Group (2009) 171 Cal.App.4th 1305, 1341-1342 [summarizing the alter ego doctrine].) We consider these theories to be sufficiently factually and legally tenable under the lenient probable cause standard.
Finally, we turn to whether the Blackburn Parties demonstrate a lack of probable cause as to the Trust's aiding and abetting theory. Aiding and abetting liability may " 'be imposed on one who aids and abets the commission of an intentional tort if the person (a) knows the other's conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other to so act or (b) gives substantial assistance to the other in accomplishing a tortious result and the person's own conduct, separately considered, constitutes a breach of duty to the third person.' " (Fiol v. Doellstedt (1996) 50 Cal.App.4th 1318, 1325-1326.) Fraudulent transfer is an intentional tort. (Filip v. Bucurenciu (2005) 129 Cal.App.4th 825, 837.) In arguing the lack of probable cause to support an aiding and abetting theory, the Blackburn Parties reiterate their factual assertion that there was insufficient evidence to prove the loan's existence. For same reasons discussed above, we are unpersuaded.
The parties have not cited—nor have we located—any published California jurisprudence endorsing the imposition of aiding and abetting liability on a non-transferee to a fraudulent transfer. At least two of our sister state high courts have rejected such a theory. (See Cadle Co. v. Woods & Erickson, LLP (Nev. 2015) 345 P.3d 1049, 1052-1053, fn. 3; Freeman v. First Union National Bank (Fla. 2004) 865 So.2d 1272, 1275; see also § 3439.13 [the UFTA "shall be applied and construed to effectuate its general purpose to make uniform the law . . . among states enacting it"].) However, absent published California case law disavowing the theory, the claim's legal tenability was sufficient; indeed, the leniency of the probable cause standard " 'reflects "the important public policy of avoiding the chilling of novel or debatable legal claims," ' " just like this one. (Parrish, supra, 3 Cal.5th at p. 776.) We express no view as to the ultimate legal merits of the cause of action.
Without a prima facie showing that the Trust lacked probable cause in the underlying action—an element vital to a malicious prosecution claim—the Blackburn Parties cannot establish the "requisite minimal merit" to survive the second step of our anti-SLAPP review. As such, the anti-SLAPP motions were properly granted.
2. Attorney Fee Awards (or Lack Thereof)
We turn next to the attorney fees awarded and denied in connection with the successful anti-SLAPP motions. A defendant who prevails on an anti-SLAPP motion generally is "entitled to recover his or her attorney's fees and costs." (Code Civ. Proc., § 425.16, subd. (c).) "An exception to [the anti-SLAPP] fee-shifting provision applies to self-represented attorneys." (Ellis Law Group v. Nevada City Sugar Loaf Properties, LLC (2014) 230 Cal.App.4th 244, 253 (Ellis).)
Catherine, Fuselier, and Kaloogian & Fuselier, LLP filed a joint motion for attorney fees, seeking recovery for their representation by attorney Joseph Lara. Collectively they sought $40,020, without any attempt at apportionment. The trial court denied the motion as to Fuselier and Kaloogian & Fuselier (the Attorney Defendants), based on the well-established rule that a law firm cannot recover fees stemming from self-representation. (E.g., Sands & Associates v. Juknavorian (2012) 209 Cal.App.4th 1269, 1273 (Sands).) It proceeded to award Catherine $2,840 in fees. The Attorney Defendants and Catherine separately appeal.
a. The Attorney Defendants' Fees
The Attorney Defendants dispute the trial court's conclusion that Lara was properly characterized as "of counsel" to the Kaloogian & Fuselier firm. Additionally, they argue that even if Lara was their of counsel, they should be reimbursed for his work.
We review the disputed factual question—i.e., whether Lara was of counsel to the firm—for substantial evidence. (Carpenter & Zuckerman, LLP v. Cohen (2011) 195 Cal.App.4th 373, 378 (Carpenter).) " 'We look at the evidence in support of the trial court's finding, resolve all conflicts in favor of the respondent and indulge in all legitimate and reasonable inferences to uphold the finding.' " (Ibid.)
The trial court concluded that Lara was of counsel to the Attorney Defendants because (1) Lara is of counsel to Business Law Group, PC, and (2) Business Law Group is a continuation of Kaloogian & Fuselier. The Attorney Defendants do not dispute the first point. As to the latter, however, they argue that Lara's of counsel status at Business Law Group should not dictate Kaloogian & Fuselier's ability to recover payment for his work. They emphasize that Lara was never of counsel at Kaloogian & Fuselier and assert that we "cannot ignore the legal distinction between [Kaloogian & Fuselier], as a party to this litigation, and [Business Law Group], as a non-party." But beyond that bare assertion, they do not explain what the pertinent "legal distinction" is and why it would matter here. Certainly there may be legal distinctions between the two that are relevant for, among other things, tax purposes. That does not negate that Business Law Group is Kaloogian & Fuselier's latest manifestation. A law firm litigant should not receive fees to which it would not otherwise be entitled by the simple expedient of changing its name.
Substantial evidence fully supports the trial court's conclusion that Business Law Group is merely a continuation of Kaloogian & Fuselier. Defendant Hayek's declaration submitted in support of his anti-SLAPP motion identified Business Law Group as "formerly known as Kaloogian & Fuselier, LLP." The Attorney Defendants also represent that Kaloogian & Fuselier no longer exists. And, Fuselier is Business Law Group's sole shareholder. The Blackburn Parties also submitted evidence of Business Law Group's online presence that lists Kaloogian & Fuselier's former contact information (e.g., its phone number). Similarly, they provided evidence that Kaloogian & Fuselier's former webpage now redirects to Business Law Group's.
Moreover, the coincidence of several events further supports the conclusion that Business Law Group is but a well-timed extension of Kaloogian & Fuselier. Lara was a law clerk at Kaloogian & Fuselier from 2014 until mid-2015, when he was admitted to the bar and became of counsel to Business Law Group. About that same time, Business Law Group took Kaloogian & Fuselier's place as counsel of record for the Trust in the underlying action, and Lara appeared on the Trust's behalf as part of Business Law Group. Thus, it can reasonably be inferred that, had Kaloogian & Fuselier remained Kaloogian & Fuselier, newly admitted attorney Lara would have become of counsel there; but, because it transitioned to Business Law Group around that same time, Lara simply took the of counsel title under its later form.
As noted above, the Attorney Defendants do not dispute that Lara is of counsel to Business Law Group. Both Fuselier and Lara declared as much. In addition, Lara is (or, at least was at the relevant time) listed as an attorney on their public webpage and appeared in court papers as of counsel to Business Legal Group. While the Attorney Defendants fleetingly represent in their briefing that "Lara has an independent contractor relationship with [Business Law Group] and is not a W-2 employee of the same," they do not contend that this alleged status (which, for that matter, is scantly supported by the record) alters the fact that Lara is publicly represented as of counsel to their firm.
Accepting the trial court's conclusion that Lara was publicly held out as of counsel to the Attorney Defendants, we next consider whether they are nonetheless entitled to recover fees for his work. A party's entitlement to attorney fees is a legal question subject to de novo review. (Sands, supra, 209 Cal.App.4th at p. 1278; Ellis, supra, 230 Cal.App.4th at pp. 252-253.)
The bar on an attorney's ability to recover fees for self-representation can be traced back to our Supreme Court's decision in Trope v. Katz (1995) 11 Cal.4th 274 (Trope). Trope held that self-represented attorneys cannot recover attorney fees under Civil Code section 1717. (Id. at p. 277.) It has since been succeeded by a robust progeny, which among other things confirms its applicability in the anti-SLAPP context. (E.g., Ellis, supra, 230 Cal.App.4th at p. 253.) Court of Appeal decisions have summarized Trope's progression ad nauseam on multiple occasions. (See Ellis, at pp. 253-256; Soni v. Wellmike Enterprise Co., Ltd. (2014) 224 Cal.App.4th 1477, 1481-1488 (Soni); Sands, supra, 209 Cal.App.4th at pp. 1278-1287; Carpenter, supra, 195 Cal.App.4th at pp. 378-383.)
For our purposes, the most pertinent case in this saga is Sands, supra, 209 Cal.App.4th 1269. There, our colleagues in the Second Appellate District forged "a bright-line rule regarding attorney fees: When a law firm holds an attorney out to the public as 'of counsel,' the firm cannot recover fees under a prevailing party clause when, as a successful litigant, it is represented by 'of counsel.' " (Id. at p. 1298.) Application of Sands here should be straightforward: Because Lara is publicly held out as of counsel to the current version of Kaloogian & Fuselier, the Attorney Defendants cannot recover for his representation.
Perhaps seeing the problem Sands creates for their case, the Attorney Defendants argue that we should part company with its bright line rule and instead distinguish it on its facts. As a counterweight, they cite to Dzwonkowski v. Spinella (2011) 200 Cal.App.4th 930 (Dzwonkowski), where the court permitted a sole practitioner (Dzwonkowski) to recover fees based on his representation by another sole practitioner (Boltz) who was acting as his of counsel. That court stated, "Boltz's title in relation to Dzwonkowski's firm is not dispositive of Dzwonkowski's eligibility to recover attorney fees. Rather, the nature of the relationship, and whether fees were incurred, are the keys." (Id. at p. 936.) To ascertain whether fees were incurred, the court looked for evidence of "an obligation to pay attorney fees, the existence of an attorney-client relationship, and distinct interests between the attorney and the client." (Id. at p. 935.)
Yet, as the Sands court took great pains to make clear, its approach "is not inconsistent with Dzwonkowski." (Sands, supra, 209 Cal.App.4th at p. 1298.) Sands emphasized that the circumstances in Dzwonkowski simply did not trigger the bright line rule. That is, "[t]here was no evidence that anyone other than the two sole practitioners knew Boltz was 'of counsel' to Dzwonkowski; Boltz was not held out to the public as 'of counsel' to Dzwonkowski. Nor was there evidence in Dzwonkowski of a close, personal, continuous, and regular relationship between the two attorneys other than '[Boltz] provides litigation services for some of Dzwonkowski's clients on a contract basis.' (Dzwonkowski, supra, 200 Cal.App.4th at p. 933.) Nothing in Dzwonkowski indicated that Boltz was listed on Dzwonkowski's letterhead as 'of counsel' or in any other capacity." (Sands, at p. 1299.) Instead, it appeared that the of counsel title was merely "the attorneys' self-description of their professional relationship." (Ibid.)
Thus, Sands and Dzwonkowski can (and do) coexist. And it is clear which governs here. Lara is publicly held out as of counsel to Business Law Group, formerly known as Kaloogian & Fuselier. Accordingly, Sands's bright line applies and the Attorney Defendants are not entitled to recover attorney fees for Lara's work. (Sands, supra, 209 Cal.App.4th at p. 1298.)
We further note that, were we to attempt to distinguish Sands on its facts, we would have no choice but to engage in the exact exercise Sands's holding sought to preclude: "To [hold] otherwise would permit an 'of counsel attorney to create a factual dispute as to whether his or her relationship with a law firm is close, personal, continuous, and regular." (Sands, supra, 209 Cal.App.4th at p. 1295.) We decline to take that approach here.
Given that Sands's bright line rule clearly applies, the Attorney Defendants' reliance on ostensible factual similarities to PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084 and Gilbert v. Master Washer & Stamping Co. Inc. (2001) 87 Cal.App.4th 212 is inapposite.
b. Catherine's Fees
Catherine contends the trial court awarded her too little. We review this ruling for an abuse of discretion, mindful that "the trial court is in the best position to value the services rendered by the attorneys in his or her courtroom." (569 East County Boulevard, LLC v. Backcountry Against the Dump, Inc. (2016) 6 Cal.App.5th 426, 436 (569 East County), citing Ketchum v. Moses (2001) 24 Cal.4th 1122, 1132 (Ketchum).)
"[A] court assessing attorney fees" on an anti-SLAPP motion "begins with a touchstone or lodestar figure, based on the 'careful compilation of the time spent and reasonable hourly compensation of each attorney . . . involved in the presentation of the case.' " (Ketchum, supra, 24 Cal.4th at pp. 1131-1132, 1136.) "The court tabulates the attorney fee touchstone, or lodestar, by multiplying the number of hours reasonably expended by the reasonable hourly rate prevailing in the community for similar work." (Christian Research Institute v. Alnor (2008) 165 Cal.App.4th 1315, 1321 (Christian Research).)
Here, the trial court explicitly and methodically employed the traditional lodestar method to calculate the amount Catherine should receive. It first concluded that Lara's work for Catherine did not commence until May 23, 2016—the first date that an entry specific to Catherine appears on Lara's billing statement—and accordingly excluded hours billed before then. From the remaining hours, it excluded time spent meeting with unidentified clients and performing nonattorney administrative tasks, as well as an entry regarding review of the evidentiary objections to the anti-SLAPP reply brief that Lara admitted was duplicative and should be stricken. Next, the court reduced the remaining total by two-thirds since—as we discussed above—Fuselier and Kaloogian & Fuselier (two of Lara's three clients) could not recover. Finally, the court reduced Lara's rate from $300 to $200 per hour, commenting that the requested rate was "unreasonably high for an attorney who has been practicing for approximately two years."
On appeal, Catherine takes issue with nearly every step the court took in calculating her award. As to the exclusion of fees for entries preceding May 23, 2016, she claims the fact that the Attorney Defendants were served over a month prior to her somehow supports the inference that "Lara began performing legal services for [her] well before her answer was filed." That may well be so, but the potential for an inference in her favor does not indicate that the trial court abused its discretion in drawing an equally, if not more, compelling contrary inference—i.e., that all the prior work was done solely for the Attorney Defendants.
Catherine dedicates a sizeable portion of her briefing to arguing that a prevailing defendant can recover "all fees associated with the defense of the case, not merely those fees pertaining directly to the motion itself." She is incorrect: A prevailing defendant may only recover fees and costs for the motion to strike, not the entire litigation. (E.g., 569 East County, supra, 6 Cal.App.5th at 433; Christian Research, supra, 165 Cal.App.4th at pp. 1320, 1324-1325.) Metabolife International, Inc. v. Wornick (S.D. Cal. 2002) 213 F.Supp.2d 1220, 1223-1224, which Catherine relies upon, does not compel a contrary result. There, all the work performed, including some on a related motion to dismiss, was "inextricably intertwined with[] the anti-SLAPP motion." (Id. at p. 1223.) But more importantly, Catherine's argument is irrelevant. The trial court did not exclude the earlier hours for lack of connection to the anti-SLAPP motion, but rather because they were hours attributable to work for another party.
Next, Catherine contends that the trial court erred in excluding hours billed for non-attorney administrative tasks. But she offers no substantive argument in support of this assertion and identifies no particular time entries that may have been erroneously stricken. In a similarly stark fashion, she contests the trial court's reduction of the remaining hours by two-thirds, arguing that Lara had not three but four clients since he was representing Herrick in two capacities. Yet, again, she cites no supporting case law. And, despite her accusation of error, there is no indication that she ever brought this argument to the trial court's attention. Neither of these decisions—standing alone or cumulatively—strike us as an abuse of discretion.
Catherine also asserts that the trial court abused its discretion in reducing Lara's rate from $300 to $200. Again, however, she does not explain why doing so was erroneous. The reduction largely rested on Lara's short tenure as an admitted attorney—at the time, he had been in practice for less than two years. The court concluded, "based on [its] experience," that $200 was a more apt rate. "The ' "experienced trial judge is the best judge of the value of professional services rendered in his court, and while his judgment is of course subject to review, it will not be disturbed unless the appellate court is convinced that it is clearly wrong." ' " (Ketchum, supra, 24 Cal.4th at p. 1132.) We are not so convinced here.
Catherine additionally asserts that her award was too small in comparison to what Hayek and Blechschmidt received. But, it was her burden to justify the amount of fees she sought. Given that we find no abuse of discretion in how her fees were calculated, that other parties received larger awards does not convince us that her award was clearly wrong.
DISPOSITION
The orders are affirmed. Hayek and Blechschmidt shall recover costs. All other parties will bear their own costs.
DATO, J. WE CONCUR: HUFFMAN, Acting P. J. NARES, J.