FYBEL, J.
Defendants Greenberg Glusker Fields Claman & Machtinger LLP and Garrett L. Hanken (collectively, defendants) appeal from an order denying their anti-SLAPP
We reverse. Plaintiffs failed to carry their burden of showing a probability of prevailing on the merits of their malicious prosecution claim, as plaintiffs did not make a prima facie showing of malice. The trial court therefore erred by denying the anti-SLAPP motion and we remand the matter with directions that the trial court grant the motion.
In 2001, plaintiffs acquired a 318-unit apartment complex located in Temecula (the property). In November 2006, Somerset Apartments Investors LLC (Somerset) purchased the property from plaintiffs. In January 2008, a retaining wall on the property, which the parties refer to as a "crib wall" (capitalization omitted), collapsed, causing tens of thousands of dollars in immediate damage. Somerset thereafter discovered inherent structural problems with the crib wall and learned that it would cost several hundred thousand dollars to prevent a recurrence of the crib wall failure. Somerset asserted that the structural problems with the wall had not been disclosed by plaintiffs.
On February 17, 2009, defendant Hanken, a partner in the law firm of defendant Greenberg Glusker Fields Claman & Machtinger, represented Somerset and Griffin Investments LLC (the Somerset parties) in the Somerset parties' lawsuit alleging a single claim for fraudulent concealment against plaintiffs (the underlying action).
On March 12, 2009, Hanken received a letter from plaintiffs' counsel, Thomas E. Gibbs, asserting that the Somerset parties' fraudulent concealment claim was not viable and should be dismissed. In the letter, Gibbs explained that at the time plaintiffs purchased the property in 2001, they had received a copy of a report, referred to by the parties as the "Okubo Report." The Okubo Report identified potentially serious defects inside the crib wall, stating: "Portions of this retaining wall assembly shows signs of earlier displacement of the earthen material that was previously being held in place by the precast units. This is a section of open rubble piled in behind the wall's face pieces that was reportedly allowed to fill in after some of the dirt washed out. There is evidence of pavement repair near the drainage inlet above in the parking drive. This retaining wall should be reviewed by a geotechnical engineer to determine if there is further work to be done to assure that this retaining wall system is stable or if it needs further work." In a chart entitled "Deferred Maintenance and Cost Estimate," the Okubo Report placed its recommendation to "[i]nvestigate and repair crib lock retaining wall at southeast corner of property" in the "[i]mmediate" category, and expressed the need for an "[a]llowance to investigate to determine actual magnitude of repair." The Okubo Report defined the "[i]mmediate" category as consisting of "[a]ll safety and life threatening situations and/or Code violations. Also included are problems, which if left uncorrected over the next year, would result in serious damage to the building or its contents."
In the March 12, 2009 letter, Gibbs also stated that before the Somerset parties acquired the property, plaintiffs had disclosed another report, referred to as the "PCI Report," which plaintiffs had obtained during a refinance of the property in 2003. The PCI Report "did not mention the potentially serious defects in the Crib Wall that the Okubo Report had reported." Gibbs enclosed a copy of the Okubo Report, a copy of the PCI Report, and a July 18, 2008 "receipt of documents" form. The receipt of documents form was initialed and signed by Somerset's principal, Sol Rabin, and listed all due diligence documents delivered by plaintiffs to the Somerset parties, including the Okubo Report and the PCI Report.
Hanken was unaware of the Okubo Report when the underlying action was filed. After reviewing Gibbs's letter and enclosures, Hanken continued to believe the Somerset parties had a viable fraud claim against plaintiffs. In a letter to Gibbs, dated March 23, 2009, Hanken explained, inter alia: "The failure of the 2003 PCI Report to identify the same defect found by the 20[0]1 Okubo report does not, as you assert, indicate that the Crib Wall Defects were `not serious.' On the contrary, the reasonable inference to be drawn from the absence of mention of the Crib Wall Defects in both the 2003 PCI Report and the inspection report done in connection with Plaintiffs' purchase of the property is that the defect that was apparent and observable at the time of the 2001 Okubo Report was no longer apparent and observable, either because vegetation or transient soil had concealed the voids or because superficial `repairs' had been done, either innocently by landscape maintenance staff or deliberately to conceal the defect." Hanken further stated: "[A] buyer's review of the reports (the 2001 Okubo Report describing a defect requiring immediate attention and the 2003 PCI Report and the 2006 inspection report disclosing no defect) would lead any reasonable buyer to conclude that the problem that was detected in 2001 was, as the 2001 Okubo Report had recommended, immediately remedied."
In a letter dated March 31, 2009, Gibbs responded to Hanken's letter, stating, inter alia, the Somerset parties had agreed that they would conduct whatever investigation they deemed necessary to evaluate the information plaintiffs provided in connection with the property, which included information contained in the Okubo Report and the PCI Report. Gibbs also asserted a variety of other arguments challenging the viability of the underlying action.
In March 2009, plaintiffs served on the Somerset parties two sets of requests for production of documents, two sets of requests for admission, two sets of special interrogatories, and two sets of form interrogatories. On March 31, plaintiffs served a notice of the deposition of Rabin along with a request for production of documents.
In a declaration filed in support of defendants' anti-SLAPP motion, Hanken stated he had difficulty responding to the discovery which had been propounded by plaintiffs in the underlying action because of the "magnitude" of the discovery, combined with "conflicts" he had in his schedule. He stated plaintiffs granted only one 15-day extension for discovery responses but otherwise refused to grant extensions for responses.
In July 2009, Hanken told Gibbs that the Somerset parties were planning to file a motion to amend the complaint in the underlying action to add a new cause of action seeking the rescission of the $38 million sale of the property to the Somerset parties. The complaint, however, was never amended.
On August 18, 2009, Hanken spoke with Gibbs on the telephone and informed him that the Somerset parties wanted to end the litigation and requested that plaintiffs make a settlement proposal.
Plaintiffs filed a first amended complaint for malicious prosecution, based on the prosecution of the underlying action, against the Somerset parties, Rabin, and defendants as counsel for the Somerset parties. Defendants filed an anti-SLAPP motion solely on their own behalf.
Defendants' anti-SLAPP motion was supported by Hanken's declaration which, in addition to describing the series of events leading up to the malicious prosecution action discussed ante, stated that not only did he believe that probable cause supported the initiation and continued prosecution of the underlying action, but "my pursuit of the litigation was not in any way characterized by malice. I had never dealt with [plaintiffs] previously. I had no prior experience with any of [plaintiffs'] principals or representatives. I had no reason or motive whatsoever to pursue a claim against [plaintiffs] in which I did not believe. I bore no ill will towards or had any negative feelings against [plaintiffs] at the time that I commenced the litigation and continued to pursue it. Indeed, I believe my lack of malice is demonstrated, inter alia, [by] the fact that the litigation was dismissed just six months after it began. The fact that I believed that the matter should be dismissed, only six months after it was filed, is not reflective of malice, hostility or my pursuing a claim against [plaintiffs] in order to punish, burden, or humiliate [them]. To the contrary, I evaluated the strengths and weaknesses of the claim, took into account the extremely aggressive manner in which it was being litigated by [plaintiffs], engaged in a cost/benefit analysis, and ultimately concluded that on balance, [the Somerset parties] would be better off not pursuing its lawsuit."
Plaintiffs filed an opposition to the anti-SLAPP motion, which was supported by Gibbs's declaration.
The trial court denied the anti-SLAPP motion, stating in pertinent part: "The Court after reviewing the moving papers, hearing oral argument, and considering supplemental briefs provided by the parties, now rules as follows: [¶] Defendants' objections # 1 and #2 are sustained; [¶] Objection #4 sustained as to hearsay ground; [¶] Objection #3 overruled. [¶] Defendants' Special Motion to Strike the First Amended Complaint pursuant to CCP §425.16 is DENIED. [¶] Court does not weigh the credibility or comparative strength of the evidence on review, but determines if there is a probability that Plaintiffs will prevail on a claim for malicious prosecution. At this time, the Court cannot state that as a matter of law there is no tenable claim being brought by Plaintiffs. The first amended complaint is legally sufficient to support a favorable judgment, if Defendants, (former plaintiffs) knew or should have known that the fraud allegation was false when the complaint was filed in the prior proceeding."
Defendants appealed.
Section 425.16 provides for a special motion to strike "[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 Constitution or the California Constitution in connection with a public issue." (§ 425.16, subd. (b)(1).) "Section 425.16, subdivision (b)(1) requires the court to engage in a two-step process. First, the court decides whether the defendant has made a threshold showing that the challenged cause of action is one arising from protected activity. The moving defendant's burden is to demonstrate that the act or acts of which the plaintiff complains were taken `in furtherance of the [defendant]'s right of petition or free speech under the United States or California Constitution in connection with a public issue,' as defined in the statute. [Citation.] If the court finds such a showing has been made, it then determines whether the plaintiff has demonstrated a probability of prevailing on the claim. Under section 425.16, subdivision (b)(2), the trial court in making these determinations considers `the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based.'" (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67.) "`The defendant has the burden on the first issue, the threshold issue; the plaintiff has the burden on the second issue.'" (Kajima Engineering & Construction, Inc. v. City of Los Angele s (2002) 95 Cal.App.4th 921, 928.) To establish a probability of prevailing on a claim, "`the plaintiff "must demonstrate that the complaint is both legally sufficient and supported by a sufficient prima facie showing of facts to sustain a favorable judgment if the evidence submitted by the plaintiff is credited."'" (Navellier v. Sletten (2002) 29 Cal.4th 82, 88-89.)
We independently review the trial court's order denying the anti-SLAPP motion de novo. (Flatley v. Mauro (2006) 39 Cal.4th 299, 325-326.) "`We consider "the pleadings, and supporting and opposing affidavits . . . upon which the liability or defense is based." [Citation.] However, we neither "weigh credibility [nor] compare the weight of the evidence. Rather, [we] accept as true the evidence favorable to the plaintiff [citation] and evaluate the defendant's evidence only to determine if it has defeated that submitted by the plaintiff as a matter of law." [Citation.]' [Citation.]" (Id. at p. 326.) We further observe that the anti-SLAPP statute is to be broadly construed. (§ 425.16, subd. (a).)
A defendant can meet his or her burden of making a threshold showing that a cause of action is one arising from protected activity by demonstrating the acts underlying the plaintiff's cause of action fall within one of the categories of section 425.16, subdivision (e). (City of Cotati v. Cashman (2002) 29 Cal.4th 69, 78.) Section 425.16, subdivision (e) provides in relevant part: "As used in this section, `act in furtherance of a person's right of petition or free speech under the United States or California Constitution in connection with a public issue' includes: (1) any written or oral statement or writing made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law."
Defendants met their burden of showing that plaintiffs' malicious prosecution claim was based on conduct protected by the anti-SLAPP statute. Plaintiffs' claim was based on defendants' act of filing the complaint in the underlying action, which squarely falls within section 425.16, subdivision (e)(1). In the respondents' brief, plaintiffs state they "concede that their malicious prosecution complaint falls within the confines of . . . [section] 425.16."
As defendants satisfied their burden of showing the conduct underlying plaintiffs' malicious prosecution claim came within section 425.16, subdivision (e)(1), the burden shifted to plaintiffs to show a probability of prevailing on the merits of their claim.
The elements of a cause of action for malicious prosecution are (1) a favorable determination on the merits of the underlying action, (2) which was brought without probable cause, and (3) which was initiated or maintained with malice. (Siebel v. Mittlesteadt (2007) 41 Cal.4th 735, 740; Daniels v. Robbins (2010) 182 Cal.App.4th 204, 226 (Daniels).) For the reasons discussed post, the trial court erred by denying defendants' anti-SLAPP motion because plaintiffs failed to carry their burden of making a prima facie showing that the underlying action was prosecuted by defendants on behalf of the Somerset parties with malice.
The California Supreme Court has explained that the malice element of malicious prosecution claims "`relates to the subjective intent or purpose with which the defendant acted in initiating the prior action. [Citation.] The motive of the defendant must have been something other than that of bringing a perceived guilty person to justice or the satisfaction in a civil action of some personal or financial purpose. [Citation.] The plaintiff must plead and prove actual ill will or some improper ulterior motive.'" (Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 292, italics omitted.)
In Daniels, supra, 182 Cal.App.4th at page 224, a panel of this court stated that in the context of malicious prosecution claims, "[i]mproper purposes can be established in cases in which, for instance (1) the person bringing the suit does not believe that the claim may be held valid; (2) the proceeding is initiated primarily because of hostility or ill will; (3) the proceeding is initiated solely for the purpose of depriving the opponent of a beneficial use of property; or (4) the proceeding is initiated for the purpose of forcing a settlement bearing no relation to the merits of the claim. [Citation.]"
As plaintiffs have provided no direct evidence of any malice by defendants in their prosecution of the underlying action, we consider whether plaintiffs have produced circumstantial evidence from which malice might be reasonably inferred. (Daniels, supra, 182 Cal.App.4th at p. 225 ["`Since parties rarely admit an improper motive, malice is usually proven by circumstantial evidence and inferences drawn from the evidence'"].) No evidence has been presented showing the underlying action was prosecuted because of any hostility or ill will. Hanken denied in his declaration that he brought or pursued the underlying action with an improper motive.
Plaintiffs contend malice can be inferred from Hanken's comments, made throughout the underlying action, suggesting that the parties settle the case. In Daniels, supra, 182 Cal.App.4th at page 227, the appellate court concluded that the plaintiff's offer to dismiss the underlying action in that case in exchange for a release of all claims was not equivalent to the bad faith exhibited by the plaintiff in HMS Capital, Inc. v. Lawyers Title Co. (2004) 118 Cal.App.4th 204, who refused to dismiss a frivolous claim unless the defendant paid it $25,000. The court in Daniels, supra, 182 Cal.App.4th at page 227, further concluded that in any event, the plaintiff's conduct, including his settlement position, could not be imputed to his attorneys to support a finding of malice on the part of the attorneys in prosecuting the underlying action in that case.
Here, the Somerset parties neither offered nor rejected any settlement proposal. The record shows Hanken repeatedly stated that the parties should settle the underlying action and invited plaintiffs to make a settlement proposal to end that litigation. Such conduct does not reflect a purpose of "forcing a settlement bearing no relation to the merits of the claim" (Daniels, supra, 182 Cal.App.4th at page 224) and thus does not support a finding of malice by defendants.
There is also no evidence defendants initiated the underlying action on behalf of the Somerset parties knowing the action was not valid. Nevertheless, plaintiffs argue the information provided by Gibbs through the March 12, 2009 letter and enclosures is sufficient to show a lack of probable cause to prosecute the underlying action. (Daniels, supra, 182 Cal.App.4th at p. 222 ["`"[P]robable cause is lacking `when a prospective plaintiff and counsel do not have evidence sufficient to uphold a favorable judgment or information affording an inference that such evidence can be obtained for trial'"'"].) For reasons we will explain, we do not agree there was a lack of probable cause to prosecute the underlying action.
However, even if there was a lack of probable cause to prosecute the underlying action, a lack of probable cause alone is insufficient to show malice.
Hanken stated in his declaration that he was unaware of the existence of the Okuba Report at the time the underlying action was filed. Plaintiffs have produced no evidence suggesting otherwise. They argue defendants' lack of awareness of the Okuba Report and PCI Report supports an inference of malice because it reflects their failure to adequately investigate the factual assertions made by the Somerset parties before suing plaintiffs in the underlying action. Plaintiffs, however, have produced no evidence showing defendants' lack of awareness of the existence of the reports was attributable to any negligence on their part. No evidence was presented regarding the extent of defendants' research and investigation before the underlying action was filed. (See Daniels, supra, 182 Cal.App.4th at p. 225 ["evidence of . . . [a]ttorneys' possible negligence in conducting factual research is also not enough on its own to show malice"].) Therefore, the record does not support the finding defendants filed the underlying action on the Somerset parties' behalf knowing it lacked probable cause.
Plaintiffs contend that after Hanken received Gibbs's March 12, 2009 letter and enclosures containing evidence which, plaintiffs argue, "explicitly disproved" the Somerset parties' fraudulent concealment claim, defendants knew the underlying action lacked probable cause. Thus, plaintiffs further contend, defendants' continued prosecution of the underlying action on the Somerset parties' behalf in the face of such knowledge constituted evidence of malice. (See Zamos v. Stroud (2004) 32 Cal.4th 958, 970 ["an attorney may be held liable for malicious prosecution for continuing to prosecute a lawsuit discovered to lack probable cause"]; Daniels, supra, 182 Cal.App.4th at p. 226 ["malice can be inferred when a party continues to prosecute an action after becoming aware that the action lacks probable cause"].)
It is true Gibbs presented Hanken with evidence that plaintiffs had disclosed the possibility of problems with the crib wall to the Somerset parties and that the Somerset parties had assumed a duty to investigate issues disclosed by plaintiffs, as outlined in Hanken's March 23, 2009 letter to Gibbs. But Hanken had reasonable counterarguments to Gibbs's position that those pieces of evidence were dispositive as to the viability of the underlying action. For example, Hanken argued a reasonable person might find the crib wall disclosure insufficient as plaintiffs merely recommended that a geotechnical engineer inspect the wall to determine if further work was needed to confirm the stability of the wall. (See Zamos v. Stroud, supra, 32 Cal.4th at p. 970 ["Only those actions that any reasonable attorney would agree are totally and completely without merit may form the basis for a malicious prosecution suit"].) This case is distinguishable from the facts in Zamos v. Stroud, supra, 32 Cal.4th at pages 961-962, 969, in which a party's attorneys continued to prosecute a lawsuit in the face of the reporter's transcripts from prior court proceedings, which directly disproved the factual allegations underlying the lawsuit.
That Hanken failed to immediately amend the complaint, withdraw as the Somerset parties' counsel, or file a request to dismiss the case after he received Gibbs's letter and enclosures does not show Hanken continued to prosecute the underlying action knowing it was unsupported by probable cause. (See Daniels, supra, 182 Cal.App.4th at p. 227 [attorneys' "sustained inability to provide any support for [their client]'s allegations, on its own, does not allow an inference that they knew there was no probable cause for continuing to prosecute the underlying action"].) Once litigation had commenced, Hanken had to evaluate the information he received, conduct research into its significance, and determine how to proceed. Such an analysis takes some time. Even so, Hanken filed a request to dismiss the underlying action in a little over five months after he received Gibbs's March 12, 2009 letter. Such conduct does not support an inference of malice on defendants' part.
Furthermore, contrary to plaintiffs' contentions in the respondents' brief, malice on the part of defendants is not shown by the Somerset parties' failure to propound discovery in the six-month period between the filing date and dismissal date of the underlying action. Malice is also not shown by the existence of a discovery dispute between the Somerset parties and plaintiffs (which resulted in the trial court granting two motions to compel against the Somerset parties and awarding sanctions in favor of plaintiffs for the failure to produce Rabin for deposition), or by the Somerset parties' failure to serve individually named defendant Kyle Martin as of the date of dismissal of the underlying action.
In light of the foregoing, plaintiffs' proffered evidence does not support a reasonable inference that defendants prosecuted any part of the underlying action on the Somerset parties' behalf for an "`improper ulterior motive'" (italics omitted) that was "`something other than that of bringing a perceived guilty person to justice or the satisfaction in a civil action of some personal or financial purpose.'" (Soukup v. Law Offices of Herbert Hafif, supra, 39 Cal.4th at p. 292.)
The order is reversed and the matter is remanded with directions to grant the anti-SLAPP motion of defendants Greenburg Glusker Fields Claman & Machtinger and Hanken. Appellants shall recover costs on appeal.
WE CONCUR:
O'LEARY, ACTING P. J.
IKOLA, J.
