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Jackson v. Yarbray

November 10, 2009


APPEALS from a judgment of the Superior Court of Los Angeles County, Robert H. O'Brien, Judge. Affirmed in part, reversed in part and remanded. (Los Angeles County Super. Ct. No. BC281670).

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


Following a bifurcated bench trial the court found, Inc. (ComputerXPress), Robert T. Yarbray, Wayne Nichols, Franklin Scivally and James L. Rather liable for the malicious prosecution of a civil action in Riverside County and awarded $700,000 in general damages for emotional distress and $2.41 million dollars in punitive damages in favor of Lee Jackson, Barbara Jackson, John Fecteau, Carol Fecteau and Thomas Mitchell, individually, and Thomas Mitchell, as the personal representative of the Estate of Doran Mitchell (collectively Jackson parties).*fn2 The Jackson parties appeal, contending the trial court erred in concluding they failed to prove Best, Best & Krieger, LLP (BB&K), counsel for ComputerXPress for part of the time the Riverside action was pending, had acted with malice and, therefore, was not liable for malicious prosecution. They also contend the court erred in denying any recovery as special damages for attorney fees and expenses incurred in defending the Riverside action because those fees were recoverable in connection with the Jackson parties? partially successful special motion to strike the complaint pursuant to Code of Civil Procedure section 425.16.*fn3 Yarbray also appeals from the judgment, contending the trial court erred in finding him the alter ego of ComputerXPress and the joint and several punitive damage award against him is improper and excessive. In addition, Yarbray challenges the court?s liability finding on several grounds. We affirm the judgment in favor of BB&K. We affirm the balance of the judgment as it relates to liability, but reverse the compensatory damage award in part and remand the matter to the trial court to determine the amount of attorney fees and costs properly recoverable as special damages by the Jackson parties.


1. The Riverside County Action

a. ComputerXPress's Complaint

As described in a well-known opinion from the Fourth Appellate District, Division Two, reversing in part the trial court's order denying the Jackson parties' special motion to strike pursuant to section 425.16 and remanding the matter for determination of an award of fees and costs to them (ComputerXpress, Inc. v. Jackson (2001) 93 Cal.App.4th 993 (ComputerXpress)), the Riverside action was initiated by ComputerXPress following an unsuccessful effort to merge the company with businesses owned by the Jackson parties. (Id. at p. 998.) In a complaint filed in March 2000 ComputerXPress, a publicly-traded company selling computer-related products, alleged during negotiations in February 1999 the Jackson parties had falsely represented their businesses were profitable, causing ComputerXPress to incur expenses and waste time. Based on these allegations the complaint asserted causes of action for fraud, negligent misrepresentation and negligence (counts 1, 2 and 3). ComputerXPress also alleged the Jackson parties entered into a conspiracy beginning in May 1999 to damage ComputerXPress's reputation and to cause it economic harm. In furtherance of that conspiracy, ComputerXPress alleged, the Jackson parties had made numerous false and disparaging statements about ComputerXPress on the Internet and elsewhere to existing and potential customers and investors. Based on these allegations the complaint asserted causes of action for trade libel, interference with contractual relations, interference with prospective economic advantage, abuse of process, conspiracy and injunctive relief (counts 4 through 9). (Ibid.) At the time it filed its complaint, ComputerXPress was represented by Nichols.

b. The Special Motion to Strike

On June 13, 2000 the Jackson parties filed a special motion to strike the complaint and each of its causes of action pursuant to section 425.16, commonly referred to as an anti-SLAPP motion.*fn4 ComputerXPress's opposition was filed by Nichols on June 30, 2000. The following month BB&K substituted into the action as counsel for ComputerXPress and filed a supplemental opposition to the motion to strike. Thereafter, the trial court denied the motion, concluding none of the nine causes of action fell within the scope of section 425.16. (ComputerXpress, supra, 93 Cal.App.4th at p. 997.) Accordingly, the court did not consider whether ComputerXPress had established a probability of prevailing on its claims. (Ibid.)*fn5

The Court of Appeal agreed the three causes of action relating to the Jackson parties' alleged misrepresentations during the failed merger discussions and the cause of action for interference with contract relations, based on their purported disparaging statements made directly to a company that had contracted with ComputerXPress, did not occur in connection with an official proceeding or arise from protected activity involving a public issue or issue of public interest. (ComputerXpress, supra, 93 Cal.App.4th at p. 1000.) However, the court held the Jackson parties had met their threshold burden by showing the remaining causes of action, which involved false and disparaging statements about ComputerXPress allegedly published on the Internet, the filing of a complaint against it with the Securities and Exchange Commission (SEC) and the posting of the SEC complaint on the Internet, all arose from protected speech or petitioning activity within the meaning of section 425.16. In particular, the court found the Internet postings, which included statements that the officers and directors of a publicly traded corporation were illegally conspiring to manipulate the value of its stock, were made in connection with an issue of public interest because the subject matter was of concern to a large number of investors and potential investors. (See id. at pp. 1007-1008.)

Turning to the second prong of the section 425.16 analysis, the appellate court held ComputerXPress had failed to demonstrate a probability of prevailing on any of the causes of action properly subject to the special motion to strike. Specifically, the court noted ComputerXPress had not identified which of the numerous Internet postings included in the record were actionable and, in any event, found none of them would satisfy the requirements for trade libel (ComputerXpress, supra, 93 Cal.App.4th at p. 1011) and none could support a claim for interference with prospective economic advantage. (Id. at p. 1014.) The remaining three claims were also found to be without any merit. (Id. at pp. 1014-1016.)

The Court of Appeal then held (following further briefing and reargument on the issue after the Jackson parties petitioned for rehearing) the Jackson parties were entitled to attorney fees and costs under section 425.16, subdivision (c), as the prevailing moving parties on a special motion to strike, concluding the fact they were only partially successful should reduce but not eliminate their entitlement to attorney fees: "Defendants consequently are entitled to recover attorney fees and costs incurred in moving to strike the claims on which they prevailed, but not fees and costs incurred in moving to strike the remaining claims. The trial court may determine the appropriate amount of fees and costs, upon a proper application by defendants." (ComputerXpress, supra, 93 Cal.App.4th at p. 1020.)

c. Proceedings on Remand

Following remand from the Court of Appeal, the Jackson parties moved for summary adjudication on the fifth cause of action (tortious interference with contractual relations).*fn6 On February 20, 2002 Marvin Zinman replaced BB&K as counsel for ComputerXPress. On behalf of ComputerXPress Zinman filed a notice of nonopposition to the motion, which the court granted on March 13, 2002.

In late February 2002 the Jackson parties filed a memorandum of costs, seeking $300,720 in attorney fees (using a lodestar multiplier of 2.0), $9,203.77 in expenses and $1,511.62 in other costs relating to its partially successful motion to strike. The declaration of Yvonne M. Renfrew filed in support of the application for attorney fees stated she had worked 444.60 hours in connection with the Jackson parties' appeal from the denial of their special motion to strike and no more than 15 hours of that total could properly be attributed to time devoted exclusively to matters on which they Jackson parties failed to prevail (that is, exclusively to issues relating to counts 1, 2, 3 and 5). ComputerXPress moved to tax costs, and the Jackson parties filed an opposition. The court heard the matter on April 30, 2002 and awarded the Jackson parties $77,000 in attorney fees. The record on this appeal, as voluminous as it is, contains no copy of any order reflecting this award. (Counsel for the Jackson parties has indicated no written order memorializing this fee award exists.) However, a notice of ruling prepared by Zinman recites the award of $77,000 was "for attorney's fees in connection with legal services at the trial level and on appeal."

On June 30, 2002 ComputerXPress dismissed all remaining claims in the Riverside action. The dismissal purported to be "without prejudice."

2. The Malicious Prosecution Action

On September 12, 2002 the Jackson parties, again represented by Ms. Renfrew, filed their complaint for malicious prosecution, conspiracy to deprive them of their civil rights in violation of title 42 United States Code section 1985 and violation of their rights under the Unruh Civil Rights Act (Civ. Code, § 51.7). A first amended complaint for malicious prosecution only was filed March 25, 2003; and the operative pleading, a second amended complaint for malicious prosecution, was filed July 14, 2003. By this time the case was assigned for all purposes to Judge Elihu M. Berle in Department 42 of the Los Angeles Superior Court.

The second amended complaint, which named ComputerXPress, BB&K, Yarbray, Nichols, Zinman, Scivally and Rather as defendants,*fn7 alleged the Riverside action was instituted and thereafter prosecuted by ComputerXPress and the other defendants, including Yarbray and BB&K, without probable cause, maliciously and with improper purposes, including chilling and punishing the Jackson parties for the exercise of their rights of free speech and petition. As to Yarbray, the pleading specifically alleged he was and continued to be the alter ego of ComputerXPress. It further alleged Yarbray "was actively instrumental in the institution and the prosecution" of the Riverside action. The complaint sought both compensatory and punitive damages.

Aurora Precious Metals, Inc., identifying itself as "a corporation, formerly named ComputerXpress.Com, Inc.," and Yarbray jointly answered the unverified second amended complaint with a general denial and asserted as affirmative defenses their reliance on the advice of counsel in proceeding with the Riverside action, no favorable termination, lack of malice and the existence of probable cause. The other defendants filed similar answers.

Following discovery and extensive pretrial motion practice, the parties waived a jury; and the malicious prosecution action was ultimately tried as a long-cause matter before Judge Robert H. O'Brien. The issue of the amount of punitive damages, if any, was bifurcated from the issues of liability and compensatory damages.

3. The In Limine Rulings on Attorney Fees as Special Damages

Prior to trial-and before the case was transferred to Judge O'Brien-BB&K moved in limine for an order precluding introduction of evidence relating to the amount of attorney fees and costs incurred by the Jackson parties in the Riverside action in connection with their special motion to strike and the subsequent appeal. BB&K argued the amount of reasonable fees and costs for the motion and appeal had been determined by the trial court in the Riverside action and the resulting fee award reduced to a money judgment against some of the defendants in the malicious prosecution action. That determination, BB&K asserted, was binding under the doctrines of res judicata and collateral estoppel. BB&K's motion attached as an exhibit the notice of ruling prepared by Zinman, reciting the trial court had awarded $77,000 in fees for legal services in the trial court and on appeal.

The Jackson parties filed an opposition to the BB&K motion and filed their own motion in limine, seeking an order excluding from trial any evidence of the fee award actually made in the Riverside action, as well as any evidence to the effect the Jackson parties had failed to enforce that award and, therefore, had failed to mitigate their damages.

Following additional briefing on the two motions, as well as on other, unrelated in limine motions filed by the parties, the court on September 3, 2004 granted BB&K's motion to preclude evidence of the actual amount of attorney fees incurred by the Jackson parties in successfully moving to strike certain claims in the Riverside action pursuant to section 425.16, "except as to attorneys' fees awarded for the SLAPP motion," and denied the Jackson parties' motion to exclude evidence of the amount of that fee award. Explaining his reasoning at the hearing on the motions, Judge Berle stated, "I believe that it is binding as collateral estoppel, if not probably even res judicata since the other action is completed and there is a final judgment. There is a final determination of that issue on the attorneys' fees for the SLAPP motion. And I would say to the extent that there are other expenses that were not covered by the motion, certainly that the plaintiff can argue about those other damages. But anything encompassed within that motion, there has already been a determination and that determination is binding."

Judge Berle further emphasized he was not making "any specific determinations on the amounts of what was included here." Counsel for the Jackson parties then inquired how the court would determine the extent of the earlier fee order. The court responded, "We will have a hearing as to the admissibility of the evidence. If there is an argument as you say-and I assume you are going to introduce evidence of damages, and then defendants are either going to say the evidence is admissible or object. The defendants will say, "Wait a minute. Those types of damages are within the scope of the previous award.'"

On September 13, 2004 the Jackson parties filed a motion for reconsideration of the court's orders on the in limine motions regarding attorney fees, arguing in part that their counsel, Ms. Renfrew, had only discovered several days earlier that the file in the Riverside action contained no actual court order that could serve as the predicate for applying the doctrine of collateral estoppel. In a supporting declaration Ms. Renfrew also stated the Jackson parties had never received any payment on account of a fee award in the Riverside action. In its opposition to the motion for reconsideration, BB&K submitted a copy of the reporter's transcript for the hearing held in the Riverside action on April 30, 2002, which reflected the court's decision to reduce Ms. Renfrew's fee request to 100 hours for legal services on the special motion to strike in the trial court and 120 hours in the appellate court at an hourly rate of $350 for a total fee award of $77,000. On October 19, 2004 the court denied the motion for reconsideration.

4. The Trial Court's Liability Determination and Award of Compensatory Damages

a. The Trial Court Proceedings and the Statement of Decision

Trial on issues of liability and compensatory damages began on January 13, 2006 and continued through February 9, 2006. Neither ComputerXPress nor Rather appeared at trial. The court issued a tentative decision on March 13, 2006, which found in favor of the Jackson parties against all remaining defendants other than BB&K, awarded compensatory damages and found by clear and convincing evidence that ComputerXPress, Yarbray, Scivally, Nichols and Rather were also liable to the Jackson parties for punitive damages.

On March 23, 2006 the Jackson parties filed a 52-page request for statement of decision pursuant to section 632, which identified 200 factual and legal issues (many with multiple subparts) for the court to address. In addition, the Jackson parties filed a 29-page document captioned "Proposals and Objections Re Tentative Decision." Yarbray and Scivally also filed requests for a statement of decision.

On April 10, 2006 the court filed its proposed statement of decision, which essentially adopted its tentative decision with minor changes. The Jackson parties then filed objections to the proposed statement of decision, asserting it "failed to address either adequately or all" item Nos. 31 through 147 in their request for statement of decision. Yarbray also objected to the proposed statement of decision. On May 1, 2006 the court adopted its proposed statement of decision as the statement of decision.

b. Issues of Liability

The court's statement of decision identified four principal issues in the case with respect to liability. First, was there a favorable termination of the Riverside action? The court concluded there was, observing that five of the nine claims were dismissed on appeal pursuant to the Jackson parties' special motion to strike, which necessarily included a determination those claims lacked merit. Although the remaining four claims were dismissed by ComputerXPress (one only after a motion for summary adjudication had been granted), the court determined these dismissals were effectively terminations on the merits as opposed to terminations for other ...

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