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Oasis West Realty, LLC v. Kenneth A. Goldman et al

May 16, 2011

OASIS WEST REALTY, LLC, PLAINTIFF AND RESPONDENT,
v.
KENNETH A. GOLDMAN ET AL., DEFENDANTS AND APPELLANTS.



Court: Superior County: Los Angeles Judge: Norman P. Tarle Super. Ct. No. SC101564

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

Los Angeles County

In 2004, defendant Attorney Kenneth A. Goldman agreed to represent plaintiff Oasis West Realty, LLC (Oasis) in its effort to obtain approval of a redevelopment project from the Beverly Hills City Council. Goldman terminated the representation about two years later. In 2008, Goldman became involved in a campaign to thwart the same redevelopment project by soliciting signatures on a referendum petition to overturn the Beverly Hills City Council's approval of the project. Shortly after the voters upheld the city council's approval by a very narrow margin, Oasis filed a complaint for breach of fiduciary duty, professional negligence, and breach of contract against Goldman and his law firm, Reed Smith, LLP.

Defendants filed a special motion to strike the complaint under the anti-SLAPP statute,*fn1 contending that all of Oasis's causes of action arose from Goldman's acts "in furtherance of [his] right of petition or free speech . . . in connection with a public issue." (§ 425.16, subd. (b)(1).) The trial court held that the anti-SLAPP statute did not apply, in that the gravamen of the causes of action was not Goldman's petitioning activity but his breach of the duties of loyalty and confidentiality, and denied the motion without considering whether Oasis had demonstrated a probability of prevailing on its claims. The Court of Appeal reversed, finding both that Oasis's claims arose from protected activity and that Oasis had failed to demonstrate a probability of prevailing on them. Even though the court found, and the parties agreed, that Goldman had acted adversely to his former client with respect to an ongoing matter that was the precise subject of the prior representation, the court declared that there is "no authority for a rule which would bar an attorney from doing what Goldman did here."

We disagree. As demonstrated below, we conclude that Oasis has stated and substantiated the sufficiency of its legal claims against its former attorneys.

BACKGROUND

In early 2004, plaintiff Oasis embarked on a plan to redevelop and revitalize a nine-acre parcel it owned in Beverly Hills by erecting a five-star hotel and luxury condominiums. A Hilton hotel was already on the property, and the project is often referred to as the Hilton project. The Hilton project required the approval of the Beverly Hills City Council.

On January 26, 2004, Oasis retained defendant Attorney Kenneth A. Goldman (Goldman) and his law firm, defendant Reed Smith, LLP (Reed Smith), to provide legal services in connection with the Hilton project. According to the engagement letter, Goldman was to "have overall responsibility for this matter." Oasis has alleged that it hired Goldman "because, among other things, he was an attorney reputed to be an expert in civic matters and a well-respected, influential leader who was extremely active in Beverly Hills politics." Oasis said it believed that "Goldman's statements and opinions on City development matters bore significant influence on City Council members and the local citizenry," particularly on members of the Southwest Homeowners Association, of which he was the president.

During the representation, Goldman became "intimately involved in the formulation of the plan for Oasis'[s] development of the Property, its overall strategy to secure all necessary approvals and entitlements from the City and its efforts to obtain public support for the Project. Mr. Goldman was a key Oasis representative in dealing with Beverly Hills City Officials, including the Planning Commission and City Council. Throughout the representation, Oasis revealed confidences to Mr. Goldman, which it reasonably believed would remain forever inviolate." Reed Smith, in turn, received about $60,000 in fees. In April 2006, Goldman advised Oasis that he and Reed Smith would no longer represent Oasis in connection with the Hilton project.

Oasis's development proposal was presented to the city council in June 2006, after the representation had ended. For the next two years, the council and the city's planning commission reviewed thousands of pages of technical studies, held over 18 hearings, and received input from hundreds of community members. In April 2008, the council certified the environmental impact report and adopted a General Plan Amendment Resolution and the Beverly Hilton Specific Plan Resolution with Conditions of Approval, which paved the way for final approval of the Hilton project.

Shortly thereafter, a group of Beverly Hills residents opposed to the General Plan Amendment formed the Citizens Right to Decide Committee, with the goal of putting a referendum on the ballot that would allow voters to overturn the city council's approval of the Hilton project. It was at this point that Goldman engaged in the conduct that is of concern in this proceeding.

According to the complaint, Goldman "lent his support" to the group opposing the Hilton project; "campaigned for and solicited signatures for a Petition circulated by said citizen's group that sought to abrogate the City Council's approval of the Project and instead place approval in the hands of the citizenry by proposition vote on November 4, 2008 (Measure 'H')"; and "distributed a letter seeking to cause residents of Beverly Hills to sign the Petition for the purpose of placing a referendum on the ballot, asking Beverly Hills voters to overturn approval of the Project." In a declaration filed in support of the special motion to strike, Goldman confirmed that on or about May 12, 2008, the day the city council provided final approval to the Hilton project, he and his wife walked their street to solicit signatures for the petition to overturn the council's decision. Goldman estimated that they spoke to 10 neighbors and collected five or six signatures over a period of less than an hour and a half, and that he left a note at four or five homes where there was no response.*fn2 Goldman estimated that through the couple's joint effort on May 12 as well as additional work by his wife, they managed to collect approximately 20 signatures. Goldman insisted that he at no time disclosed confidential information acquired during the representation of Oasis to anyone, and did not believe that he disclosed to anyone that he had ever represented Oasis in connection with the Hilton project.*fn3

In a letter to Reed Smith dated May 14, 2008, Oasis criticized Goldman's conduct as a "manifest violation of both his and your firm's fiduciary obligations as our prior counsel" and demanded that Goldman and Reed Smith "immediately and unconditionally terminate and withdraw from any and all activities that may in any manner be construed as adverse to the Project, its approval or Oasis'[s] interests." Reed Smith responded by letter the same day that pending its review of these allegations, Goldman and the firm had agreed not to "engage in any actions concerning the referendum petition that is being circulated." In a letter sent the next day, Oasis insisted that "remedial action" be taken immediately to minimize further damage and proposed that Goldman and his wife ("as mutual agents of the other") "retract the letter and their support for the petition and referendum."

The citizens' committee collected the necessary signatures to place the proposed General Plan Amendment on the ballot as Measure H. Measure H, which ratified the city council's decision, was passed by voters on November 2, 2008, by a margin of 129 votes.

On January 30, 2009, Oasis filed the pending lawsuit against Goldman and Reed Smith for breach of fiduciary duty, professional negligence, and breach of contract, seeking damages in excess of $4 million. Defendants filed a special motion to strike under section 425.16 on March 9, 2009. The trial court denied the special motion to strike, finding that the anti-SLAPP statute did not apply. The trial court determined that the "gravamen" of this action was Goldman's breach of his duty of loyalty and confidentiality as well as his duty to disclose adverse interests at the outset of the representation, not his solicitation of signatures for the referendum petition or speaking at the city council meeting. Because defendants had failed to make a threshold showing that the causes of action arose from protected activity, the trial court found no need to address the second step of the anti-SLAPP inquiry--i.e., whether Oasis had established a probability of prevailing at trial.

The Court of Appeal reversed in a published opinion. The court acknowledged our oft-quoted warning in Wutchumna Water Co. v. Bailey (1932) 216 Cal. 564, 573-574--that "an attorney is forbidden to do either of two things after severing his relationship with a former client. He may not do anything which will injuriously affect his former client in any manner in which he formerly represented him nor may he at any time use against his former client knowledge or information acquired by virtue of the previous relationship"--but decided that such a "sweeping statement" applied only "in the context of subsequent representations or employment" and did not govern "the acts an attorney takes on his or her own behalf." Although Goldman "unquestionably acted against the interest of his former client, on the issue on which he was retained," the Court of Appeal found that Oasis had not stated a claim for breach of duty or violation of professional ethics, inasmuch as Goldman had not undertaken a "second attorney- client relationship or second employment of any kind" with an adverse interest, was no longer representing Oasis as a current client, and had not disclosed confidential information acquired during ...


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