Court Sanctions Attorney for Misuse of Anti-SLAPP

A SLAPP suit seeks to chill or punish a party's exercise of constitutional rights to free speech and petition the government for redress of grievances. The California Legislature enacted the anti-SLAPP statute to provide a procedural remedy to dispose of lawsuits that are brought to chill the valid exercise of constitutional rights.

Justice Kenneth R. Yegan wrote, “This appeal illustrates an attorney's misuse of the anti-SLAPP statute.”

The Justice quoted an earlier decision that said, “however efficacious the anti-SLAPP procedure may be in the right case, it can be badly abused in the wrong one, resulting in substantial cost—and prejudicial delay.” Justice Yegan said, “This is the wrong case.”

Read on to see what the attorney did in this litigation to draw the ire of the Court of Appeals and incur roughly $20,000 in sanctions.

BACKGROUND

Clarity Consulting (“Clarity”) contracted to provide services to ONclick Healthcare (“Onclick”) on an hourly basis. ONclick is a start-up health care company that was formed in 2019. The Appellant, Larry Gabriel, who’s a licensed California attorney, is the general counsel of ONclick.

But ONclick didn’t pay for the services, so Clarity sued alleging breach of contract action against Onclick and their attorney. Acting in his individual capacity, the attorney filed a special motion to strike the complaint as a strategic lawsuit against public participation (SLAPP). The other defendants didn’t join in the motion. The motion was denied. This appeal is from the trial court's orders denying the motion and awarding Clarity its attorney fees as a sanction for making a frivolous anti-SLAPP motion.

AN ANTI-SLAPP ACTION IS THE WRONG REMEDY, THE COURT OF APPEALS RULES

The attorney argued that the trial court erroneously determined that he’d failed to satisfy the first step of the anti-SLAPP statute—a prima facie showing that Clarity’s causes of action were based on protected activity. He also claimed that the trial court abused its discretion in awarding attorney fees incurred by Clarity in opposing the anti-SLAPP motion.

The complaint alleged:

Defendants breached the contract [the contract between Clarity and ONclick] … by failing and refusing to pay for the services contemplated by Defendants and completed by [Clarity]. Multiple demands for payment have been made. To date, no payment in any amount has been provided.

Clarity claimed that it had sustained damages in the minimum amount of $63,500.00. The prayer for relief requested both compensatory and punitive damages.

The trial court denied the attorney’s motion, noting that this was a breach of contract action based on the agreement between Clarity and ONclick. The attorney chose the wrong remedy, the trial court said, and the SLAPP motion shouldn’t have been filed.

Justice Yegan explained that a court evaluates an anti-SLAPP motion in two steps:

First, the defendant must identify the activity each challenged claim rests on and demonstrate that that activity is protected by the anti-SLAPP statute. A defendant satisfies this by demonstrating that the conduct by which the plaintiff claims to have been injured falls within one of the four categories described in California Civil Code § 425.16(e), and that the plaintiff's claims in fact arise from that conduct. The four categories in that subdivision describe conduct ‘“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.”

At this stage, the Justice noted, the only question is whether a defendant has made out a prima facie case that activity underlying a plaintiff's claims is statutorily protected.

Next, if the defendant carries its first-step burden, the plaintiff must then show that its claims have at least minimal merit. But if the plaintiff fails to meet that burden, the court will strike the claim.

The complaint alleged that the injury-producing conduct was the attorney’s intentional misrepresentations that:

1. ONclick was financially healthy;
2. It would be able to pay for Clarity’s services; and
3. It had the means to finance an employment contract with Clarity’s CEO that was “valued in excess of $1,000,000 annually.”

The purpose of the misrepresentations and concealment was to induce Clarity to enter into the service agreement with ONclick and provide its services on credit instead of requiring payment in advance.

The Court of Appeals held that the injury-producing conduct that may be characterized as “fraudulent misconduct” doesn’t qualify as litigation-related protected activity. The attorney’s misrepresentations and acts of concealment weren’t made in contemplation or anticipation of future litigation. There was no claim or dispute to be litigated or settled when they were made, the Court said.

The attorney’s litigation-related activity did not commence until the employment-contract negotiations “broke down” and ONclick refused Clarity’s request that it immediately pay its invoices, Justice Yegan wrote.

The Court of Appeals found that the attorney failed to carry the initial burden of establishing “a prima facie case that activity underlying [respondent's] claims [in the fifth and sixth causes of action] is statutorily protected … .” The causes of action focus on the attorney’s unprotected activity before the commencement of protected settlement discussions on Clarity’s breach of contract claim. As a result, the trial court’s decision was affirmed. The attorney was ordered to pay sanctions of $12,798.50 to Clarity and $8,500 to the clerk of the appellate court. (Clarity Co. Consulting, LLC v. Gabriel, California Court of Appeal of, Second Appellate District, 4/12/22).

BOTTOM LINE

The attorney was given more than adequate notice in the trial court that his anti-SLAPP motion was not designed for this contractual dispute. And he was given the same notice on appeal. “The warnings should have given him pause,” the Court wrote. “They did not.”

Trial attorneys who prosecute their own appeals, such as the one here may have “tunnel vision,” the Court of Appeals concluded. “Having tried the case themselves, they become convinced of the merits of their cause. They may lose objectivity…”

When all signs say a notion is a bad idea, it’s probably a bad idea. An experienced attorney can objectively look at a case to determine its merit. An attorney personally involved just can’t see it.