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Sanai v. Saltz

January 26, 2009; as modified February 18, 2009


APPEAL from orders and a judgment of the Superior Court of Los Angeles County, Terry A. Green, Judge. Affirmed in part, reversed in part and remanded. (Los Angeles County Super. Ct. No. BC235567).

The opinion of the court was delivered by: Perluss, P. J.


Cyrus M. Sanai appeals from the judgment entered after the trial court granted motions for judgment on the pleadings filed by Harvey A. Saltz, the former president of The U.D. Registry, Inc. (UDR), a company acquired during the pendency of these proceedings by First Advantage Corporation, and by First Advantage Corporation, as successor-in-interest to UDR, terminating Mr. Sanai's action for violations of the federal Fair Credit Reporting Act (FCRA) and the California Consumer Credit Reporting Agencies Act and related state common law claims based on UDR's negative reports about Mr. Sanai's credit following a dispute between Mr. Sanai and his landlord over the amount of rent due for an apartment Mr. Sanai had leased in Newport Beach. Mr. Sanai also appeals from several trial court orders relating to a stay of discovery, denial of leave to amend his complaint and awards of attorney fees and costs. We reverse in part.


We described at length the largely undisputed factual background and the procedural history of the first five years of this litigation in our nonpublished decision in Sanai v. Saltz (June 28, 2005, B174924/B170618), from which we now liberally borrow.

1. The Rent Dispute and the Negative Credit Report

Mr. Sanai rented an apartment in a Newport Beach apartment complex known as Promontory Point from August 26, 1997 through January 1999. After the expiration of the original, six-month lease, Mr. Sanai continued to occupy the apartment on a month-to-month basis at a rent of $2,165. In September 1998 Mr. Sanai received a letter dated August 31, 1998 from a representative of the owner of the apartment complex stating a new monthly rent of $1,435 was being established for his apartment and offering him "the option to renew [for] a minimum of a 6-month up to a 12-month lease, at the monthly rent of $1,410 effective October 1, 1998." A second copy of this letter was taped to Mr. Sanai's door a few days after he had received the original by mail.

Mr. Sanai responded on October 1, 1998 with a letter of acceptance for a 12-month lease, enclosing a rent check of $1,410 for October 1998.

Within a day of Mr. Sanai's acceptance of the offer set forth in the August 31, 1998 letter, a representative of the owner informed Mr. Sanai the monthly rental amount was a misprint and advised him the offer was rescinded. Mr. Sanai (a transactional lawyer) responded that he had accepted the offer and the contract was binding.*fn1 Further discussions between Mr. Sanai and representatives of the owner did not resolve the dispute. In December 1998 a three-day notice to quit was posted on Mr. Sanai's door. Mr. Sanai moved out of the Promontory Point apartment complex in January 1999.

From October 1, 1998 through the time he left his Newport Beach apartment, Mr. Sanai paid rent at the rate of $1,410 per month. In February 1999, after Mr. Sanai had moved, a representative of the owner contacted Mr. Sanai and demanded he pay back rent in the amount of $2,781; Mr. Sanai refused. Each party threatened the other with legal action.

The owner of the apartment complex filed no legal action to enforce its claim for unpaid rent against Mr. Sanai and apparently did not assign the debt to a collection agency. However, it did retain UDR and Mr. Saltz in April 1999 to inform consumer credit reporting agencies of the claim for unpaid rent against Mr. Sanai.

In January 2000 Mr. Sanai applied for and was denied a low-interest credit card from American Express due to information from a credit-reporting agency that a debt had been sent to collection. Citibank subsequently declined Mr. Sanai's request to increase his credit-line limit for the same reason. Mr. Sanai obtained a copy of his credit report, which listed an item from UDR stating a collection account was past due for unpaid rent at Promontory Point. Mr. Sanai then requested that UDR and Mr. Saltz insert in its reports additional information about Mr. Sanai's dispute with the owner of Promontory Point pursuant to Civil Code section 1785.16. Mr. Sanai has subsequently alleged UDR did not include in its reports sent to third parties the text he had requested.

2. Mr. Sanai's Complaint and UDR's Special Motion To Strike

In September 2000 Mr. Sanai filed a complaint against UDR and Mr. Saltz alleging causes of action for slander, libel, intentional and negligent interference with prospective economic advantage, intentional and negligent infliction of emotional distress, violations of the Consumer Credit Reporting Agencies Act (Civ. Code, § 1785.1 et seq.) and violation of the FCRA (15 U.S.C. § 1681s-2). The complaint sought in excess of $5 million in damages.

After answering the complaint, UDR filed a special motion to strike under Code of Civil Procedure section 425.16, asserting Mr. Sanai's lawsuit was brought in retaliation for UDR's exercise of its constitutional right to petition or engage in speech related to a matter in litigation. UDR argued that, because Mr. Sanai's debt was detailed in the three-day notice to pay rent or quit that had been served on him as a prerequisite to eviction proceedings, its actions in reporting that alleged debt to the major credit bureaus was speech made in connection with an issue under consideration or review by a judicial body within the meaning of Code of Civil Procedure section 425.16, subdivision (e)(2). On December 5, 2000 the trial court denied the motion, concluding UDR had failed to make the required threshold showing that the challenged causes of action arose from protected activity within the meaning of section 425.16, subdivision (e).*fn2 At the same time the trial court denied Mr. Sanai's motion for preliminary injunction, which sought to enjoin UDR from threatening to make or making false statements about him to consumer credit reporting agencies, finding Mr. Sanai had not demonstrated he was likely to prevail on the merits of his lawsuit.

UDR and Mr. Saltz appealed the trial court's order denying the special motion to strike, filing notices of appeal on January 16, 2001 (Code Civ. Proc., §§ 425.16, subd. (j), 904.1, subd. (a)(13)); Mr. Sanai cross-appealed from the trial court's denial of his motion for a preliminary injunction (Code Civ. Proc., § 904.1, subd. (a)(6)). On February 2, 2001, two months after the trial court's ruling denying its special motion to strike, UDR also filed a petition for writ of mandate to vacate the trial court's order and requested this court immediately stay all trial court proceedings, arguing its right to appeal the trial court's order was not an adequate remedy. Mr. Sanai opposed the writ petition, noting UDR had exercised its right to appeal from the trial court's denial of the special motion to strike and asserting that none of the public interest considerations the Legislature sought to protect through Code of Civil Procedure section 425.16's expedited procedures was implicated by this case.

We summarily denied the petition for writ of mandate and request for stay of proceedings on February 9, 2001. (The U.D. Registry, Inc. v. Superior Court (Feb. 9, 2002, B147603) [nonpub. opn.], review den. Apr. 25, 2001, S095491.) UDR did not seek a stay of the trial court proceedings by petition for a writ of supersedeas ancillary to its appeal, either before or after our summary denial of its petition for writ of mandate. (See Reed v. Superior Court (2001) 92 Cal.App.4th 448, 455.)*fn3

In an opinion filed March 21, 2002 we affirmed the trial court's denial of UDR's special motion to strike, holding that "for the official proceeding in [Code of Civil Procedure] section 425.16, subdivision (e), clauses (1) and (2), to be 'equated' with a public issue, there must be an actual official proceeding to which the conduct at issue can be connected. If there was no actual official proceeding, there was no public issue to which the conduct can be connected, and the conduct should not fall within the protection of section 425.16, subdivision (e), clauses (1) and (2)." (Sanai v. The U.D. Registry, Inc. (Mar. 21, 2002, B147392) [nonpub. opn.], at [p. 19].) Mr. Sanai's cross-appeal from the denial of his motion for a preliminary injunction was dismissed as moot. (Id. at [pp. 21-22].) The remittitur issued May 24, 2002.

3. Further Proceedings in the Trial Court

While the appeal from the denial of UDR's special motion to strike was pending in this court from January 16, 2001 to May 24, 2002, the litigation proceeded in the trial court, which issued a number of orders, at least at the outset without any formal objection by either party, determining pleading issues and discovery disputes (including orders for sanctions) and ultimately resolving against Mr. Sanai all of the substantive issues raised by his lawsuit.

Initially, the trial court held Mr. Sanai's landlord was a necessary and indispensable party to the action. As a result, Mr. Sanai filed a first amended complaint and thereafter a second amended complaint adding the owners of the apartment Mr. Sanai had leased (Irvine Apartment Communities, L.P., Irvine Apartment Communities, LLC, and The Irvine Company, collectively Irvine Entities) as defendants and asserting a cause of action against Irvine Apartment Communities, L.P. and Irvine Apartment Communities, LLC for breach of a written lease agreement (the purported agreement to lease the apartment for 12 months at a monthly rental of $1,410 beginning October 1, 1998).*fn4 UDR, as assignee of the Irvine Entities, then filed a cross-complaint to collect the disputed unpaid rent.

On October 18, 2001 the trial court sustained UDR's demurrer to the first seven causes of action in the second amended complaint without leave to amend. The court ruled that the second amended complaint did not allege UDR had wrongfully reported a false debt; indeed, according to Mr. Sanai's allegations, UDR had fully complied with Civil Code section 1785.25, subdivision (c), which requires that, if a debt is subject to a continuing dispute, any information about that debt submitted to a credit reporting agency must include a notice that the information is disputed by the consumer. Judgment on the pleadings in favor of Mr. Saltz and the Irvine Entities on those same seven causes of action was granted by the trial court on December 21, 2001 based on the court's earlier ruling on UDR's demurrer to the second amended complaint. A final judgment of dismissal was thereafter entered as to The Irvine Company and Mr. Saltz on March 8, 2002, shortly before we filed our opinion affirming the trial court's denial of UDR's special motion to strike.

The eighth cause of action in the second amended complaint, the only remaining claim against UDR, was resolved against Mr. Sanai on February 13, 2002 when the trial court granted UDR's motion for summary adjudication, concluding UDR had not published Mr. Sanai's consumer credit report during the time periods alleged in the second amended complaint, an element of the claim for violation of Civil Code section 1785.16. On March 26, 2002 the trial court granted the motion for judgment on the pleadings filed by Irvine Apartment Communities, L.P. and Irvine Apartment Communities, LLC on the last claim in Mr. Sanai's lawsuit, the ninth cause of action for breach of contract. The trial court ruled Mr. Sanai's attempt to accept the offer for a one-year lease at a $1,410 monthly rental was ineffective because the written offer (even assuming no mistake in the price term) required acceptance no later than September 30, 1998, while Mr. Sanai's letter of acceptance was dated October 1, 1998. The trial court entered a final order of dismissal as to Irvine Apartment Communities, L.P. and Irvine Apartment Communities, LLC on April 2, 2002. Mr. Sanai served a combined written notice of entry of final judgment and final orders of dismissal as to all the Irvine Entities and Mr. Saltz on April 13, 2002.

After all of the causes of action in Mr. Sanai's second amended complaint had been dismissed and a trial date set for UDR's cross-complaint to collect unpaid rent, Mr. Sanai made a statutory tender of the full amount sought by UDR (whether this offer was prompted by the trial court's statement it would entertain a motion for terminating sanctions as a result of Mr. Sanai's failure to comply with discovery orders or was independently prompted by tactical considerations is disputed by the parties). UDR accepted the offer and dismissed its cross-complaint on May 17, 2002 -- one week prior to issuance of the remittitur in Sanai v. The U.D. Registry, Inc., supra, B147392. A final judgment was entered in the case on September 17, 2002.

4. Mr. Sanai's Postjudgment Motion To Set Aside Void Orders and Our Decision Directing the Trial Court To Vacate All Orders Entered After January 16, 2001

Following entry of the final judgment, UDR and the Irvine Entities filed both a joint memorandum of costs and a consolidated motion for attorney fees on November 25, 2002. Mr. Sanai moved to strike the costs memorandum as to all parties as untimely; he opposed the attorney fee motion on the merits and also argued as to the Irvine Entities the motion was untimely. After hearing argument the trial court granted UDR and the Irvine Entities' request for leave to file the costs memorandum late and awarded $7,248.60 in costs. The court denied the request for attorney fees under the attorney fee provision in the lease agreement, but found UDR was entitled to attorney fees under Civil Code section 1785.31, subdivision (e), which authorizes the award of fees to a limited class of successful defendants in actions under the Consumer Credit Reporting Agencies Act (actions against "debt collectors" related to the collection of a debt) if the lawsuit was not brought in good faith. The court awarded UDR $136,034 in fees, 25 percent of the total fees sought by all defendants in their consolidated attorney fee motion.

While appealing from those cost and fee orders, Mr. Sanai also moved in the trial court, pursuant to Code of Civil Procedure section 473, subdivision (d), to set aside void orders and judgment, asserting the trial court lacked jurisdiction to make any orders denying him relief or granting relief to the defendants during the pendency of the appeal from the denial of UDR's special motion to strike. The trial court denied the motion, and Mr. Sanai appealed from that order as well.

In Sanai v. Saltz, supra, B174924/B170618, decided June 28, 2005 on rehearing following the Supreme Court's decision in Varian Medical Systems, Inc. v. Delfino (2005) 35 Cal.4th 180 (Varian), we reversed the trial court's order denying Mr. Sanai's motion to set aside void judgment and orders, vacated the judgment entered against Mr. Sanai and reversed all postjudgment orders awarding and denying costs and attorney fees. As we explained, in Varian the Supreme Court held, by virtue of Code of Civil Procedure section 916, the perfecting of an appeal from the denial of a special motion to strike pursuant to Code of Civil Procedure section 425.16 automatically stays all further trial court proceedings on the merits as to those causes of action affected by the motion (Varian, at p. 191) and also held any subsequent trial court proceedings on matters "'embraced' in or 'affected' by" the appeal are void, not merely voidable: "[S]ection 916, as a matter of logic and policy, divests the trial court of jurisdiction over the subject matter on appeal -- i.e., jurisdiction in the fundamental sense." (Id. at p. 198.)

We remanded the matter to the trial court with directions to vacate all orders entered after January 16, 2001, the date on which UDR and Mr. Saltz filed notices of appeal from the denial of UDR's special motion to strike Mr. Sanai's complaint, and to conduct further proceedings based on the state of the pleadings on January 16, 2001. In addition, to return the parties so far as practicable to the positions they occupied on January 16, 2001, we directed the trial court to consider Mr. Sanai's request for restitution -- initially made to us in connection with his appeals from the postjudgment orders -- and to order reimbursements to the extent appropriate. Finally, we awarded Mr. Sanai his costs on appeal.*fn5

5. Post-remand Proceedings in the Trial Court

a. Mr. Sanai's Pursuit of his Costs on Appeal

On September 22, 2005 Mr. Sanai filed a memorandum of costs on appeal (apparently served by mail the previous day), seeking $4,922.95 in costs jointly and severally from Mr. Saltz, First Advantage Corporation, which had been substituted for UDR as a party in the proceedings during the appeal, and the Irvine Entities. The defendants' motion to tax costs, filed October 12, 2005, was ruled untimely (one day late). No motion for relief was filed, and on March 28, 2006 the trial court signed an order submitted by Mr. Sanai instructing the clerk to prepare a judgment in the amount of $4,922.95, plus interest from September 22, 2005, in favor of Mr. Sanai. The order also recited "Mr. Sanai may enforce such judgment from and after March 8, 2006."

On April 5, 2006 Mr. Sanai obtained an abstract of judgment based on the March 28, 2006 order, which he then had recorded in Los Angeles and Orange Counties. (No actual judgment was signed until May 9, 2006.) On April 12, 2006 Mr. Sanai served on Mr. Saltz, First Advantage Corporation and the Irvine Entities (that is, he served the corporate defendants but not their counsel) a memorandum of costs after judgment pursuant to Code of Civil Procedure section 685.070, seeking recovery of the costs incurred preparing and recording the abstracts of judgment ($52), other cost items totaling just under $700 and $137,800 in attorney fees.*fn6 The memorandum of costs after judgment was filed April 17, 2006. The clerk's judgment dated May 9, 2006 includes a stamp, apparently dated May 8, 2006, indicating "costs after judgment in the amount of [handwritten insert '$138,547.00'] claimed by [handwritten insert 'Plaintiff']."

Michael Saltz, counsel for First Advantage Corporation, gave Mr. Sanai telephonic notice of his intention to apply to the court ex parte for an order shortening time to move to strike the memorandum of costs after judgment. The next day, May 11, 2006, Michael Saltz and Mr. Sanai appeared before the court, and Michael Saltz moved to strike the memorandum of costs. According to Mr. Sanai, he objected that he had only been given notice of a request to shorten time, not that a substantive motion would be presented to the court. The trial court granted the motion to strike, but subsequently vacated that order after Mr. Sanai presented evidence confirming Michael Saltz had not given proper notice of the ex parte hearing, stating only that he would be seeking an order to shorten time. A minute order dated May 12, 2006 ...

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