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Hylton v. Frank E. Rogozienski

September 23, 2009

ELDON HYLTON, PLAINTIFF AND RESPONDENT,
v.
FRANK E. ROGOZIENSKI, INC., ET AL., DEFENDANTS AND APPELLANTS.



APPEAL from an order of the Superior Court of San Diego County, Richard E. L. Strauss, Judge. Affirmed. (Super. Ct. No. 37-2007-00072299-CU-PN-CTL).

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

CERTIFIED FOR PUBLICATION

Plaintiff Eldon Hylton filed a complaint against his former attorney, defendant Frank E. Rogozienski, seeking damages and rescission of a contingency fee contract based on Rogozienski's alleged misfeasance in connection with his professional representation of Hylton. Rogozienski moved to strike the complaint pursuant to Code of Civil Procedure*fn1 section 425.16, commonly referred to as the anti-SLAPP (strategic lawsuit against public participation) statute. (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 57 (Equilon).) The trial court denied Rogozienski's motion and this appeal followed.

I. FACTUAL AND PROCEDURAL BACKGROUND

A. The Facts*fn2

Hylton's Relationship with DivX

Hylton founded a software company, DivXNetworks, Inc (DivX). In August 2000 Hylton and DivX entered into a founder stock purchase agreement (FSPA) that entitled Hylton to purchase three million shares of DivX common stock for $3000. Hylton paid the required consideration, and DivX issued a certificate evidencing his ownership of the shares. The FSPA also provided a variety of vesting dates for the stock.

The FSPA provided DivX with the right to repurchase Hylton's shares under a variety of circumstances. DivX had a right of first refusal that entitled it to repurchase Hylton's stock if he attempted to sell those shares to another investor, subject to the conditions set forth in the right of first refusal. DivX also had the right to repurchase unvested shares, subject to specified conditions, if Hylton's employment was terminated by DivX for cause within the meaning of the FSPA, or he attempted to transfer the unvested shares in violation of the agreement.

The Employment Termination and Resulting Underlying Lawsuit

On February 16, 2001, DivX advised Hylton his employment was being terminated. It did not give him any reason for the termination, and did not inform him the termination had been for cause for any of the reasons specified in the FSPA. DivX also did not provide Hylton with the requisite notice under the FSPA that it was exercising its option to repurchase the unvested shares, and did not tender payment for those shares as required by the FSPA.*fn3

Shortly after Hylton's employment termination, he retained a law firm to resolve his disputes with DivX. The law firm was unable to negotiate an agreed resolution of the dispute, and an attempt to mediate the dispute was similarly unsuccessful. However, by December 2001, Hylton informed the law firm he no longer wished it to represent him.

Hylton had been in contact with Rogozienski about the dispute during the latter half of 2001. Hylton sought legal advice from Rogozienski because Hylton believed his employment had been wrongfully terminated. Rogozienski advised Hylton he should file suit for wrongful employment termination. Rogozienski also advised Hylton that his lawsuit should include a claim seeking to confirm the stock ownership. Rogozienski induced Hylton to sign a contract for legal services (the Contingency Contract), which provided Rogozienski would collect a contingency fee of one-third of all "Consideration Paid, Collected or Recovered" as a result of the lawsuit, including one-third of all of the stock "confirmed, awarded or otherwise retained by [Hylton]." Based on Rogozienski's advice, Hylton agreed to file a lawsuit seeking, among other things, to confirm Hylton's ownership of the stock.

Hylton's lawsuit against DivX was filed in February 2002. Rogozienski subsequently advised Hylton that he could lose his stock if he did not settle the lawsuit, and in August 2003 Hylton agreed to settle the lawsuit against DivX. Under the terms of that settlement, DivX confirmed it could not repurchase any of the shares owned by Hylton and consented to Hylton's transfer of 1 ...


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