IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION FIVE
December 17, 2010
LOUISE PEIRONA ET AL., PLAINTIFFS AND APPELLANTS,
TMT ASSOCIATES, LLC ET AL., DEFENDANTS AND RESPONDENTS.
(Alameda County Super. Ct. No. HG09429443)
The opinion of the court was delivered by: Bruiniers, J.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
This case arises from related litigation over ownership and income distribution rights of TMT Associates, LLC (TMT), a single asset real estate holding limited liability company. Kiet Nguyen (Nguyen) was one of two members of TMT, and the other was Thomas Peirona. Thomas Peirona died suddenly in 2005, and his estate and his surviving spouse, Louise Peirona (Peirona; collectively Plaintiffs), sued Nguyen claiming entitlement to distributions from TMT's income (the San Mateo County Litigation). (Peirona v. Nguyen et al. (Super. Ct. San Mateo County, 2005, No. CIV445795).)
In the San Mateo County Litigation, the trial court issued a preliminary injunction limiting Nguyen's use of TMT funds and the claims were referred to arbitration under the terms of TMT's Operating Agreement, with a stipulation that the injunction would remain in effect until the arbitration was concluded. While arbitration was pending, the commercial property owned by TMT went into foreclosure and Nguyen, acting on behalf of TMT, signed an agreement to reinstate financing (Loan Reinstatement Agreement) with TMT's lender that Plaintiffs alleged violated the terms of the injunction and stipulation.
In this action, Plaintiffs sued TMT and its attorney, David L. Andersen (collectively Defendants), alleging they wrongly induced Nguyen to sign the Loan Reinstatement Agreement in violation of the injunction in the San Mateo County Litigation. The trial court struck the complaint as a strategic lawsuit against public participation (SLAPP),*fn1 finding it arose from Defendants' protected litigation activities and that Plaintiffs had not established a probability of prevailing on the merits. We affirm. We also impose sanctions against Plaintiffs and their counsel for pursuing a frivolous appeal.
On January 7, 2009, Peirona, as an individual and the surviving spouse of Thomas Peirona, and Joseph Della Santina, as administrator of Thomas Peirona's estate, filed the complaint in this matter against Defendants. The complaint made the following allegations.
TMT was formed in 1996 by Nguyen and Thomas Peirona. Its sole asset is commercial property located at 150 Industrial Road, San Carlos, California (the Property). Under the TMT Operating Agreement and subject to certain limitations, Nguyen and Thomas Peirona were respectively entitled to 51 percent and 49 percent distributions of TMT's net income. However, Nguyen took far greater distributions than his proportionate share. After Thomas Peirona's death in February 2005, Peirona succeeded to his economic interest in TMT and attempted to obtain monthly distributions from the company, a return of excessive money taken from TMT by Nguyen, and an accounting of TMT. When her efforts were unsuccessful, Peirona sued Nguyen in San Mateo County Superior Court in March 2005.*fn2
The parties entered into a written stipulation later incorporated into a stipulated amended preliminary injunction that was filed January 6, 2006 (January 6, 2006 Preliminary Injunction). The January 6, 2006 Preliminary Injunction permitted Nguyen to make four specified expenditures of TMT funds, required him to obtain Peirona's consent before making any other expenditures, and provided that TMT's net income be distributed 51 percent to Nguyen and 49 percent to Peirona. "In consideration for the requirements set forth [in the January 6, 2006 Preliminary Injunction], [P]laintiffs agreed to arbitrate the claims" raised in the San Mateo County Litigation. Plaintiffs alleged that the stipulated January 6, 2006 Preliminary Injunction was a "contract" between them and Nguyen.*fn3
TMT had been in default on a loan with Wachovia Bank (Lender) secured by the Property since about October 2004. In April 2007, the parties in the San Mateo County Litigation stipulated to the appointment of a receiver for TMT, which constituted an additional default event under the loan documents. Nevertheless, Lender "forebore these defaults and continued to receive mortgage payments from [TMT], albeit with superinflated interest rates and additional fees . . . ." TMT failed to pay off the loan balance by its December 11, 2007 due date, and in April 2008, Lender filed a foreclosure action in San Mateo County (the Foreclosure Action; CSFB 1997-C2 1515 Industrial Way LP v. TMT Associates, LLC et al. (Super. Ct. San Mateo County, 2008, No. CIV 472342)). In the Foreclosure Action, Lender requested appointment of a new receiver, but "the hearing thereon was continued numerous times in return for [TMT's] agreement to pay all of the monthly rent proceeds from the [mortgaged property] to [Lender]. [Peirona's] consent for such an agreement was never sought nor did she agree to such an arrangement." On August 1, 2008, TMT signed the Loan Reinstatement Agreement with the Lender, requiring TMT to pay all of its monthly rental income from the Property to Lender. Peirona's consent for that agreement was never sought nor obtained. Peirona had received an average of $20,000 per month under the terms of the January 6, 2006 Preliminary Injunction, but she stopped receiving distributions after February 2008.
In their complaint, Plaintiffs alleged causes of action against TMT for inducing breach of contract and intentional interference with contractual relations, on the theory that Nguyen's execution of the Loan Reinstatement Agreement was a violation of "the stipulated preliminary injunction/contract," apparently referring to both the January 6, 2006 Preliminary Injunction and the June 6, 2006 Stipulation. They also sued Andersen for breach of fiduciary duty. Plaintiffs alleged that Andersen owed a fiduciary duty to Nguyen as TMT's sole remaining member and to Peirona as an "economic interest holder" in TMT. Plaintiffs alleged that Andersen breached his fiduciary duty to TMT by inducing Nguyen to breach his contract with them; causing TMT to interfere with performance of that contract; agreeing to the distribution of all of TMT's monthly income to Lender without Peirona's consent; and executing the Loan Reinstatement Agreement without Peirona's consent.
Defendants filed a special motion to strike the complaint as a SLAPP pursuant to Code of Civil Procedure section 425.16.*fn4 They argued that Plaintiffs' claims arose from Defendants' "settling a lawsuit brought against TMT by a third party[,] . . . [i.e.,] the exercise of constitutionally protected rights of speech and petition in connection with a judicial action." Defendants argued that "Plaintiffs complain of the litigation tactics involved in that lawsuit and the advice given to TMT and its manager, [Nguyen], by TMT's attorney regarding the decision to effect a settlement of that suit. This is speech and petition [activity] which arises from a judicial proceeding and is protected." They also argued Plaintiffs could not establish a probability of prevailing on the merits because Defendants' conduct was protected by the litigation privilege (Civ. Code, § 47) and in any event did not give rise to any valid legal claim. Andersen separately argued that Plaintiffs had offered no legal theory or evidence to establish that he owed them a fiduciary duty.
The trial court granted the motion to strike, stating "Defendants have met their initial burden of demonstrating that Plaintiffs' Complaint contains causes of action arising from an act in furtherance of Defendants' right of petition or free speech. [Citation.] Moreover, Plaintiffs have failed to establish a probability that they will prevail on their claims. [Citation.]." The court dismissed the action and awarded Defendants' attorney fees pursuant to section 425.16, subdivision (c).
A. Anti-SLAPP Motion to Strike
Plaintiffs argue that the trial court erred by striking their complaint pursuant to the anti-SLAPP statute.
Section 425.16, the anti-SLAPP statute, provides in relevant part: "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 shall be subject to a special motion to strike, unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim." (§ 425.16, subd. (b)(1).)
"[T]he Legislature enacted section 425.16 in an effort to curtail lawsuits brought primarily 'to chill the valid exercise of . . . freedom of speech and petition for redress of grievances' and 'to encourage continued participation in matters of public significance.' (§ 425.16, subd. (a).) . . . The goal is to eliminate meritless or retaliatory litigation at an early stage of the proceedings. [Citations.] The statute directs the trial court to grant the special motion to strike 'unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim.' (§ 425.16, subd. (b)(1).)" (Gallimore v. State Farm Fire & Casualty Ins. Co. (2002) 102 Cal.App.4th 1388, 1395-1396, fn. omitted (Gallimore).)
"The statutory language establishes a two-part test. First, it must be determined whether the plaintiff's cause of action arose from acts by the defendant in furtherance of the defendant's right of petition or free speech in connection with a public issue. [Citation.] 'A defendant meets this burden by demonstrating that the act underlying the plaintiff's cause fits one of the categories spelled out in section 425.16, subdivision (e).' [Citation.] Assuming this threshold condition is satisfied, it must then be determined that the plaintiff has established a reasonable probability of success on his or her claims at trial. . . . [¶] . . . Whether section 425.16 applies and whether the plaintiff has shown a probability of prevailing are both legal questions which we review independently on appeal. [Citations.]" (Gallimore, supra, 102 Cal.App.4th at p. 1396.) The statute provides that section 425.16 "shall be construed broadly." (§ 425.16, subd. (a).)
Under the statute, the party moving to strike a cause of action has the initial burden to show that the cause of action arises from an act in furtherance of the moving party's right of petition or free speech. (§ 425.16, subd. (b)(1); Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67 (Equilon).) Once that burden is met, the burden shifts to the opposing party to demonstrate the probability that it will prevail on the claim. (§ 425.16, subd. (b)(1); Equilon, at p. 67.) An appellate court independently reviews whether section 425.16 applies and whether the plaintiff has shown a probability of prevailing. (ComputerXpress, Inc. v. Jackson (2001) 93 Cal.App.4th 993, 999.) We consider "the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based," accepting as true the allegations and evidence of the nonmoving parties except insofar as the moving party's evidence defeats them as a matter of law. (§ 425.16, subd. (b)(2); Hylton v. Frank E. Rogozienski, Inc. (2009) 177 Cal.App.4th 1264, 1267, fn. 2 (Hylton).)
1. Whether Claims Arise from Protected Activity
Defendants contend that Plaintiffs' claims are based on their conduct in settling the Foreclosure Action,*fn5 and therefore fall under section 425.16, subdivision (e)(2), which includes statements made in connection with civil court litigation. (Healy v. Tuscany Hills Landscape & Recreation Corp. (2006) 137 Cal.App.4th 1, 4-5.) "Litigation is activity protected by the speech and petition clauses." (Drummond v. Desmarais (2009) 176 Cal.App.4th 439, 449, citing Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 734-735 (Jarrow Formulas).)
Cases construing section 425.16, subdivision (e)(2) hold that "a statement is 'in connection with' litigation under section 425.16, subdivision (e)(2), if it relates to the substantive issues in the litigation and is directed to persons having some interest in the litigation." (Neville v. Chudacoff (2008) 160 Cal.App.4th 1255, 1266, fn. omitted; see also Kashian v. Harriman (2002) 98 Cal.App.4th 892, 908 [courts have adopted "a fairly expansive view of what constitutes litigation-related activities within the scope of section 425.16"].) Protected activity may include investigating a claim or sending a prefiling demand letter when litigation is seriously anticipated,*fn6 filing a lawsuit or counterclaim,*fn7 making arguments to the court during a lawsuit,*fn8 commenting about litigation in public or private,*fn9 and negotiating a settlement.*fn10
That the factual basis for a legal claim involves litigation, however, does not automatically bring the claim within the protections of section 425.16. The claim must arise from the protected activity to merit anti-SLAPP protection. "[T]he mere fact that an action was filed after protected activity took place does not mean the action arose from that activity for the purposes of the anti-SLAPP statute. [Citation.] Moreover, that a cause of action arguably may have been 'triggered' by protected activity does not entail that it is one arising from such. [Citation.] In the anti-SLAPP context, the critical consideration is whether the cause of action is based on the defendant's protected free speech or petitioning activity. [Citations.]" (Navellier, supra, 29 Cal.4th at p. 89.) Thus, "we disregard the labeling of the claim [citation] and instead 'examine the principal thrust or gravamen of a plaintiff's cause of action to determine whether the anti-SLAPP statute applies' . . . . [Citation.] We assess the principal thrust by identifying '[t]he allegedly wrongful and injury-producing conduct . . . that provides the foundation for the claim.' [Citation.]" (Hylton, supra, 177 Cal.App.4th at p. 1272.)
Plaintiffs concede that Defendants' communications and conduct in response to the Foreclosure Action constitute protected activity under the anti-SLAPP statute. Nevertheless, they insist that the gravamen of their complaint arose out of the legal obligations created in the San Mateo County Litigation, and therefore are not subject to SLAPP protections. They are wrong.
Two recent cases have held that lawsuits arising from a defendant's acts in settling litigation were SLAPP suits. In GeneThera, a plaintiff sued multiple defendants who were represented by joint counsel. (GeneThera, supra, 171 Cal.App.4th at p. 905.) Plaintiff's counsel offered to settle the action as to one defendant alone, and the remaining defendants countersued, alleging the separate settlement offer constituted intentional interference with contractual relations among the defendants and an unethical attempt to create a conflict of interest among the defendants. (Id. at p. 906.) The court held the "communication of an offer to settle the ongoing lawsuit" was protected activity and the claim was subject to a motion to strike. (Id. at p. 908.) The gravamen of the suit was that plaintiff's choice of how to prosecute the action (a direct exercise of the right to petition) harmed the other defendants' positions in the lawsuit. That the alleged harm was itself related to the litigation helped to demonstrate that the litigation context was not merely incidental to the claims.
In Seltzer, a case recently decided by this court, a homeowner's association sued a homeowner for trespass and failure to pay assessment fees. (Seltzer, supra, 182 Cal.App.4th at p. 958.) The homeowner's insurer provided a defense subject to a reservation of rights on the ground that the assessment claims were not covered by the homeowner's insurance policy. (Id. at p. 959.) The insurer then negotiated a separate settlement of the trespass claims. (Ibid.) The homeowner sued the insurer, alleging it had colluded with the homeowner's association to settle the trespass claims so the insurer could deny the homeowner a defense on the assessment claims. (Ibid.) This court held that the homeowner's claim was based on the "communication of an offer to settle and the content of the offer" and thus fell within the protection of the anti-SLAPP statute. (Id. at p. 963.) As in GeneThera, the gravamen of the complaint was that the insurer's choice of how to prosecute the action (a direct exercise of its right to petition) harmed the plaintiff's own position in the litigation.
The cases relied upon by Plaintiffs are distinguishable. In Martinez v. Metabolife Internat., Inc., a product liability defendant sought anti-SLAPP protection on the ground that its labeling and advertising of the product (which were referenced in the complaint) were communications made in connection with an issue of public interest and constituted commercial speech protected by the First Amendment. (Martinez v. Metabolife Internat., Inc. (2003) 113 Cal.App.4th 181, 184-185, 187.) The Court of Appeal held the action was not covered by the anti-SLAPP statute because the defendant's "commercial speech, although mentioned in the complaint, is largely unrelated to and entirely distinct from the wrongful, injury-causing conduct . . . on which the Plaintiff's claims are premised," which was that the defendant's product caused the plaintiff to suffer a stroke. (Id. at pp. 184, 188.) "[I]t is the principal thrust or gravamen of the plaintiff's cause of action that determines whether the anti-SLAPP statute applies [citation] and when the allegations referring to arguably protected activity are only incidental to a cause of action based essentially on non-protected activity, collateral allusions to protected activity should not subject the cause of action to the anti-SLAPP statute." (Ibid.) Similarly, in Episcopal Church Cases, the Supreme Court denied anti-SLAPP protection where, "[a]lthough protected activity arguably lurks in the background of this case, the actual dispute concerns property ownership rather than any such protected activity." (Episcopal Church Cases (2009) 45 Cal.4th 467, 473.)*fn11
There is no question here but that Plaintiffs seek to impose liability on Defendants for their conduct in settling the Foreclosure Action. They allege that TMT, acting "[b]y and through its attorney," obtained the dismissal of the Foreclosure Action by inducing and causing Nguyen to sign the Loan Reinstatement Agreement. The gravamen of Plaintiffs' claims is that TMT and its attorney (Andersen) took actions to resolve TMT's own legal proceedings and as a result impaired Plaintiffs' alleged contractual right arising from stipulations with other parties in related litigation. Plaintiffs' claims are clearly within the scope of section 425.16, subdivision (e)(2).
2. Whether Plaintiffs Have Established a Probability of Prevailing
In order to establish a probability of prevailing for purposes of section 425.16, subdivision (b)(1), " '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." ' [Citations.]" (Navellier, supra, 29 Cal.4th at pp. 88-89.) "A plaintiff opposing an anti-SLAPP motion bears the burden to make a prima facie showing of facts that would support a judgment in plaintiff's favor. [Citations.] Anti-SLAPP motions must be supported (and opposed) by declarations stating facts upon which the liability or defense is based. (§ 425.16, subd. (b).)" (HMS Capital, Inc. v. Lawyers Title Co. (2004) 118 Cal.App.4th 204, 211-212 (HMS Capital).) " '[S]section 425.16 is analogous to other statutes requiring the plaintiff to make a threshold showing, which are aimed at eliminating meritless litigation at an early stage.' [Citations]." (Id. at p. 211.) "In opposing an anti-SLAPP motion, the plaintiff cannot rely on the allegations of the complaint, but must produce evidence that would be admissible at trial. [Citation.]" (Id. at p. 212.) We conclude, as did the trial court, that Plaintiffs have failed to establish a probability of prevailing on the merits of their claims.
Defendants contend, among other things, that their alleged conduct cannot provide the basis for liability because it is protected by the litigation privilege of Civil Code section 47, subdivision (b) as a matter of law.*fn12 The principal purpose of the Civil Code section 47 litigation privilege " 'is to afford litigants and witnesses [citation] the utmost freedom of access to the courts without fear of being harassed subsequently by derivative tort actions. [Citations.]' [Citation.] The privilege promotes effective judicial proceedings by encouraging ' "open channels of communication and the presentation of evidence" ' without the external threat of liability. [Citation.] The litigation privilege 'further promotes the effectiveness of judicial proceedings by encouraging attorneys to zealously protect their clients' interests.' [Citation.] 'Finally, in immunizing participants from liability for torts arising from communications made during judicial proceedings, the law places upon litigants the burden of exposing during trial the bias of witnesses and the falsity of evidence, thereby enhancing the finality of judgments and avoiding an unending roundelay of litigation, an evil far worse than an occasional unfair result. [Citations.]' [Citation.]" (Home Ins. Co. v. Zurich Ins. Co. (2002) 96 Cal.App.4th 17, 23.) " 'Although originally enacted with reference to defamation actions alone [citation], the privilege has been extended to any communication, whether or not it is a publication, and to all torts other than malicious prosecution. [Citations.] Thus, the privilege has been applied to suits for fraud [citations], negligence and negligent misrepresentation [citation], and interference with contract [citation].' [Citation.]" (Ibid., italics added.)
"[T]he litigation 'privilege applies to any communication (1) made in judicial or quasi-judicial proceedings; (2) by litigants or other participants authorized by law; (3) to achieve the objects of the litigation; and (4) that have some connection or logical relation to the action. [Citations.]' [Citation.]" (Sylmar Air Conditioning v. Pueblo Contracting Services, Inc. (2004) 122 Cal.App.4th 1049, 1058.)
Each of these four elements is satisfied here. All of Plaintiffs' causes of action rest on assertions that TMT and Andersen, participants in the Foreclosure Action, importuned Nguyen to execute and deliver the Loan Reinstatement Agreement for the purpose of settlement of that litigation. Whatever liability, if any, Nguyen may have incurred by doing so, the litigation privilege bars Plaintiffs' claims as to Defendants in this action as a matter of law.
In light of our determination that the litigation privilege precludes the claims Plaintiffs seek to pursue here, it would normally not be necessary to address the other bases Defendants advance in arguing that Plaintiffs could not prevail on the merits. We do so briefly since they are relevant to Defendants' contention that this is a frivolous appeal.
Plaintiffs' third cause of action is a claim of breach of fiduciary duty by Andersen. They cite Corporations Code section 17304 to argue they have economic interests in TMT, but they cite no authority that such an interest creates a fiduciary duty between them and TMT's counsel. " '[B]efore a person can be charged with a fiduciary obligation, he must either knowingly undertake to act on behalf and for the benefit of another, or must enter into a relationship which imposes that undertaking as a matter of law. [Citations.]' [Citations.]" (Oakland Raiders v. National Football League (2005) 131 Cal.App.4th 621, 632.) Plaintiffs never explain why Andersen owed them a fiduciary duty, nor have they produced evidence or authority to support the existence of such a duty or a breach thereof. They therefore failed to establish even a prima facie claim against Andersen on this basis in the trial court, and offer no authority or reasoned argument for their position here.
Their claims against TMT allege interference with a contract between Plaintiffs and Nguyen, namely the January 6, 2006 Preliminary Injunction and the June 6, 2006 Stipulation in the San Mateo Litigation. Even if these claims were not barred by the litigation privilege, to prevail on these causes of action, Plaintiffs would necessarily have to establish the existence of Nguyen's contractual obligations to them under the stipulation--a theory expressly rejected by the trial court in the San Mateo County Litigation, and which we reject in our concurrent decision in Peirona et al. v. Nguyen et al., supra, A126551.*fn13
Plaintiffs' contract theory depends on their having provided valuable consideration for Nguyen's promises in the stipulations. Plaintiffs argue that they provided consideration for the June 6, 2006 Stipulation by voluntarily agreeing to submit their claims to arbitration. However, other than bare and unsupported pleading allegations, Plaintiffs never explain why their agreement to arbitrate their claims was voluntary, since there is clear language in the Operating Agreement and in Peirona's consent to the terms of the TMT Operating Agreement that requires all disputes related to the agreement be submitted to binding arbitration. Plaintiffs similarly failed to produce any evidence that they provided valuable consideration for Nguyen's promises in the June 6, 2006 Stipulation, thus rendering it a binding contractual obligation. They thus failed to make the necessary threshold showing to establish even a prima facie meritorious case.
Because Plaintiffs have not established a probability of prevailing on any of their claims, all of which arise from Defendants' protected activity, we affirm the trial court's order striking their complaint as a SLAPP.
B. Motions for Sanctions
TMT and Andersen have requested sanctions against Plaintiffs for prosecuting an appeal that is frivolous and filed for improper purposes. We further consider whether to impose sanctions payable to the clerk of this court for filing a frivolous appeal, and for Plaintiffs' violations of appellate court rules. We notified Plaintiffs that we were considering imposing sanctions and Plaintiffs filed a brief arguing that sanctions are not warranted. (See Cal. Rules of Court, rule 8.276(c), (d).)
Section 907 provides, "When it appears to the reviewing court that the appeal was frivolous or taken solely for delay, it may add to the costs on appeal such damages as may be just." Rule 8.276 of the California Rules of Court similarly provides that the court may impose sanctions on a party or an attorney for "[t]aking a frivolous appeal or appealing solely to cause delay," as well as for "[c]omitting any other unreasonable violation of these rules." (Cal. Rules of Court, rule 8.276(a)(1), (4).) The California Supreme Court has held that an appeal is frivolous "only when it is prosecuted for an improper motive--to harass the respondent or delay the effect of an adverse judgment--or when it indisputably has no merit--when any reasonable attorney would agree that the appeal is totally and completely without merit. [Citation.]" (In re Marriage of Flaherty (1982) 31 Cal.3d 637, 650.)
1. Whether Sanctions are Warranted
We conclude sanctions are warranted for pursuing a frivolous appeal. Plaintiffs sued TMT and Andersen for conduct facially protected under the SLAPP statute--settlement of litigation. They provided no persuasive argument or authority in support of their position in either the trial court or before this court. Even if we were to accept, however, that Plaintiffs' arguments on the first prong of the SLAPP analysis were not completely meritless, their arguments under the second prong of the anti-SLAPP analysis--i.e., their argument regarding the merit of their claims--are clearly frivolous.
We have found, for the reasons discussed above, that Plaintiffs' claims are barred as a matter of law by the litigation privilege. In addition, Plaintiffs have never articulated, or even attempted to articulate, a reason why they were not compelled to submit their claim to arbitration under the Operating Agreement. As their contract theory of the June 6, 2006 Stipulation depended on their voluntary submission to arbitration in exchange for a promise that the January 6, 2006 Preliminary Injunction stay in effect, and their claims against TMT in this action involve interference with this alleged contract, Plaintiffs in effect prosecuted this action based on a legal theory they never fully articulated and that was patently without foundation. Indeed, the theory is directly contradicted by evidence within the appellate record. Any reasonable attorney would conclude that Plaintiffs' relentless pursuit of this unsupported theory was frivolous.
As to Andersen, Plaintiffs have never articulated any supportable theory of why he had a fiduciary duty to them, either as an issue of fact or as a matter of law, or how he breached that duty. They barely even address this argument in their opening brief, and they do not address it all in their reply brief, even though Andersen discussed the issue in his separately-filed respondent's brief.
Finally, the apparent lack of effort Plaintiffs put into their opposition to the motion in the trial court and this appeal suggests a lack of faith in the merits of their arguments and an improper purpose in bring the appeal. Starting in the trial court, Plaintiffs untimely filed and served their opposition to the motion to strike and on the merits completely misconstrued the argument the Defendants made in their moving papers.*fn14 On appeal, they misrepresent the procedural history, incorrectly stating that Andersen did not file a respondent's brief, and misrepresent the trial court record, incorrectly stating that the San Mateo County Superior Court denied Plaintiffs' motion to set aside the Loan Reinstatement Agreement "because the parties to the [Loan] Reinstatement Agreement were not before the court as parties in the action." (Bolding omitted.) In fact, the trial court denied that motion (insofar as it claimed the Loan Reinstatement Agreement violated the June 6, 2006 Stipulation) because Plaintiffs had "produce[d] no competent showing as to . . . [a] need" for distributions under the June 6, 2006 Stipulation and January 6, 2006 Preliminary Injunction, and the "reinstatement agreement save[s] the parties about $400,000." Further, Plaintiffs did not support their core arguments with legal argument applying legal principles to the particular facts of the case on appeal. (Guthrey v. State of California (1998) 63 Cal.App.4th 1108, 1115-1116.)
Defendants have also produced evidence that more directly demonstrates that Plaintiffs acted with an improper purpose in opposing their motion to strike and prosecuting this appeal. Andersen avers that in the San Mateo County Litigation, Plaintiffs' counsel (the same counsel representing Plaintiffs in this action) expressly threatened to report Nguyen to the Internal Revenue Service for criminal prosecution of tax evasion unless Nguyen agreed to forfeit a favorable arbitration ruling. Moreover, Plaintiffs' counsel told Andersen he intended to keep filing motions in the San Mateo court until Nguyen "gave up and agreed to a settlement on [Plaintiffs' counsel's] terms," even if TMT lost the Property as a result. Plaintiffs do not dispute these averments or provide declarations of their own in opposition to the sanctions motions.
Defendants also cite evidence that Plaintiffs filed and maintained this action for the improper purpose of attempting to create a conflict of interest between TMT and Andersen, thus disrupting TMT's defense in the arbitration proceeding. After three unsuccessful attempts to delay a January 7, 2009 arbitration hearing in the San Mateo County Litigation, Plaintiffs' counsel served TMT and Andersen with the complaint in this action at the outset of the January 7 hearing and argued to the arbitrator that the lawsuit created a conflict of interest between TMT and Andersen, and that Peirona's consent was required for any waiver of the conflict. The arbitrator allowed the hearing to proceed. These events tend to support Defendants' contention that at the time Plaintiffs filed this action they were seeking to delay resolution of the arbitration proceeding, and the filing of this action was part of that campaign.
Plaintiffs argue that Defendants' accusations of harassment, even if true, relate only to the San Mateo County Litigation and do not establish that Plaintiffs' prosecution of this action or appeal is for a harassing purpose. However, the substantive frivolousness of the appeal (e.g., Plaintiffs' complete failure to explain why their agreement to arbitrate their claims was voluntary and thus constituted consideration for the June 6, 2006 Stipulation, or to explain why Andersen owed them a fiduciary duty or breached such duty) and the careless quality of the Plaintiffs' appellate briefs by themselves support an inference that Plaintiffs brought the claim for an improper purpose. (See Pierotti v. Torian (2000) 81 Cal.App.4th 17, 32 (Pierotti) [given "appellate counsels' utter failure to discuss the most pertinent legal authority . . . and their preparation of a grossly inadequate record, we conclude they . . . subjectively prosecuted the appeal for an improper purpose"].) The evidence that these matters were part of a pattern of harassing conduct in the closely related San Mateo County Litigation bolsters that inference. Plaintiffs argue that their appeal logically could not have been brought for purposes of delay because "it is an appeal from the dismissal of an action brought against respondent TMT." (Bolding omitted.) However, the appeal delays finality of the litigation, and there is a strong inference that Plaintiffs have used delaying tactics in an effort to maintain negotiating leverage with Nguyen and Defendants.
2. Amount of Sanctions
In determining the amount of a monetary sanction, we may consider "the amount of respondent's attorney fees on appeal; the amount of the judgment against appellant; the degree of objective frivolousness and delay; and the need for discouragement of like conduct in the future. [Citation.]" (Pierotti, supra, 81 Cal.App.4th at pp. 33-34.) Greater sanctions are warranted where sanctions are imposed on more than one ground, for example for the filing of a frivolous appeal as well as for repeated violations of appellate court rules. (Id. at p. 33.)
TMT and Andersen seek sanctions in amounts equal to the attorney fees they incurred on appeal (including fees incurred in prosecuting the motions for sanctions), to be imposed in addition to the attorney fee awards they are entitled to receive as prevailing parties on the anti-SLAPP motion. They argue that there will be no deterrent effect on Plaintiffs or their counsel if Plaintiffs must pay only the amounts that they would otherwise be responsible for on an unsuccessful appeal under section 425.16, subdivision (c), and that counsel would thereby escape any personal liability, despite his greater responsibility.
We agree that for any sanctions to be meaningful, there must be a cost to both Plaintiffs and their counsel. Plaintiffs' counsel, A.K. Abraham, had a professional duty to raise only non-frivolous arguments on appeal and to comply with the rules of the appellate court and breached that duty. (See Pierotti, supra, 81 Cal.App.4th at pp. 36-37; Keitel v. Heubel (2002) 103 Cal.App.4th 324, 342-343; Pollock v. University of Southern California (2003) 112 Cal.App.4th 1416, 1433-1434; In re Marriage of Economou (1990) 223 Cal.App.3d 97, 106; Cosenza v. Kramer (1984) 152 Cal.App.3d 1100, 1102-1103.) Plaintiffs themselves are not blameless, for they initiated the appeal and benefited from the delay in finality of the arbitration award. (See Pierotti, at p. 37.) Therefore, we will impose sanctions against both Plaintiffs and their counsel, Mr. Abraham, who shall be jointly and severally liable for paying the sanctions.
We are not convinced, however, that doubling Defendants' actual fees and costs is necessarily the appropriate measure of sanctions. We therefore impose a monetary sanction of $15,000 in favor of each Defendant, jointly and severally against both Plaintiffs and their counsel, A.K. Abraham.
We also impose sanctions payable directly to the clerk of this court. "Because a frivolous appeal, or one taken for improper reasons, harms the court, not just the respondent, a growing number of courts are ordering appellants to pay sanctions directly to the court clerk to compensate the state for the cost of processing such appeals. [Citations.]" (Pierotti, supra, 81 Cal.App.4th at p. 35.) A 2008 case cites a cost analysis by the clerk's office for the Second Appellate District that estimated the cost of processing an appeal that results in an opinion by the court to be approximately $8,500. (In re Marriage of Gong & Kwong (2008) 163 Cal.App.4th 510, 520; see also Huschke v. Slater (2008) 168 Cal.App.4th 1153, 1163-1164 [relying on that cost analysis to set amount of sanctions payable to the court].)*fn15 We conclude that a sanction of $8,000 is appropriate to reimburse the state for the costs of this appeal.
The aforementioned sanctions are reasonable in light of the multiple grounds for the sanctions award in this appeal and the "particular need to discourage like conduct in the future because this appeal was taken from a judgment confirming an arbitration award. . . . By filing a frivolous appeal from a judgment confirming an arbitration award a party defeats the very purpose of the arbitration process. [Citation.]" (Pierotti, supra, 81 Cal.App.4th at pp. 34-35.)
The judgment is affirmed. On remand, the trial court shall determine the amount of attorney fees due to TMT and Andersen under section 425.16, subdivision (c). Plaintiffs shall pay the additional sums of $15,000 to TMT and $15,000 to Andersen as sanctions. Plaintiffs shall also pay $8,000 to the clerk of this court as sanctions for bringing this frivolous appeal and for unreasonably violating the California Rules of Court. Plaintiffs' counsel, A.K. Abraham, shall be jointly and severally liable with Plaintiffs to pay the aforementioned sanctions to TMT, Andersen and the clerk of this court.
Sanctions payable to the court shall be paid no later than 15 days after the date the remittitur is filed. The clerk of this court is directed to deposit the sanctions received in the court's general fund. Abraham and the clerk of this court are each ordered to forward a copy of this opinion to the State Bar upon return of the remittitur. (Bus. & Prof. Code, §§ 6086.7, subd. (a)(3), 6068, subd. (o)(3); Pierotti, supra, 81 Cal.App.4th at pp. 37-38.) TMT and Andersen are awarded their costs on appeal.
We concur: Jones, P. J. Simons, J. A126790