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Kurz v. Syrus Systems, LLC

California Court of Appeals, Sixth District

November 22, 2013

EDWARD KURZ, Plaintiff, Cross-defendant and Appellant,
v.
SYRUS SYSTEMS, LLC, Defendant, Cross-complainant and Respondent.

Santa Clara County Superior Court, Superior Court No.: CV207221, Hon. Kevin E. McKenney, Trial Judge

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COUNSEL

Charles Joshua Katz for Plaintiff, Cross-defendant and Appellant.

Willoughby, Stuart & Bening and Ellyn E. Nesbit for Defendant, Cross-complainant and Respondent.

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OPINION

Bamattre-Manoukian, J.

I. INTRODUCTION

After appellant Edward Kurz filed a wrongful termination action against Syrus Systems, LLC (Syrus), his alleged former employer, Syrus filed a cross-complaint that included a cause of action for malicious prosecution. Syrus alleged that Kurz had maliciously prosecuted a meritless claim for unemployment insurance benefits that terminated in Syrus’s favor when the claim was denied and the denial was upheld on appeal by a decision of the Unemployment Insurance Appeals Board of the Employment Development Department (EDD).

Kurz brought a special motion to strike the malicious prosecution cause of action in the cross-complaint pursuant to Code of Civil Procedure section 425.16, [1] the anti-SLAPP[2] statute. Section 425.16 provides that a cause of action arising from constitutionally protected speech or petitioning activity is subject to a special motion to strike unless the plaintiff (or cross-complainant) establishes a probability of prevailing on the claim. (§425.16, subd. (b)(1).) The trial court denied the motion.

On appeal, Kurz contends that the trial court erred in denying his anti-SLAPP motion because Syrus cannot establish a probability of prevailing on the malicious prosecution claim, since Unemployment Insurance Code section 1960[3] provides that “[a]ny finding of fact or law, judgment, conclusion, or final order... in any action or proceeding before the [Unemployment Insurance Appeals Board], ... shall not be used as evidence in any separate or subsequent action or proceeding, between an individual and his or her present or prior employer....” For the reasons stated below, we agree and therefore we will reverse the trial court’s order.

II. FACTUAL AND PROCEDURAL BACKGROUND

A. The Pleadings

In 2011, Kurz filed a complaint against Syrus alleging that he was employed by Syrus as its chief financial officer from 2008 until he was wrongfully terminated on January 26, 2010.

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In the first cause of action for employment discrimination, Kurz asserted that he had an employment agreement obligating Syrus to pay him an annual salary of $40, 000 in exchange for approximately 40 hours of work per month. As his workload increased, Kurz requested additional compensation and the chief executive officer of Syrus, Igor Sokolov, allegedly agreed to pay him an additional $15, 000. Kurz further alleges that on January 25, 2010, Sokolov terminated his employment by contacting Bank of America, informing the bank that Kurz was no longer an employee, and removing Kurz’s “bank pass code.” The complaint includes additional employment discrimination causes of action, as well as contract and tort causes of action.

Syrus filed a cross-complaint in 2012 that includes causes of action for accounting malpractice, breach of contract, and malicious prosecution. In the cross-complaint, Syrus alleges that in 2005 it entered into an agreement with Kurz, as the sole proprietor of Able Financial Management Services, that Syrus would pay Kurz a flat fee of $40, 000 per year as an independent contractor to “receive all company mail, ... attend to all [Syrus’s] accounts receivable/payable matters, [and] provide general bookkeeping services, tax preparation and filings.” Syrus also added Kurz to the company checking account so he could issue payments. In 2010, Kurz allegedly failed to provide Sokolov with online access to the company’s bank accounts. Syrus asserts that Sokolov and Syrus’s chief operating officer, Larry Hasha, went to Bank of America and had the “bank pass code” changed so that Sokolov could regain access to company’s funds.

Syrus further asserts that it never terminated Kurz’s services and sent Kurz an e-mail on January 31, 2010, informing him that he had not been terminated. Syrus also advised Kurz’s attorney that Kurz had not been terminated. In June 2010, Kurz filed a claim with EDD for unemployment benefits. Syrus objected to Kurz’s claim and appealed the initial EDD decision in Kurz’s favor. In a written decision dated November 12, 2010, the administrative law judge “concluded that KURZ was not entitled to benefits as he was deemed to have voluntarily quit his work without good cause.” Kurz appealed and on May 27, 2011, the Unemployment Insurance Appeals Board affirmed the administrative law judge’s decision denying unemployment benefits. Syrus asserts that it has incurred more than $22, 000 in attorney fees and costs in defending Kurz’s EDD claim.

In the third cause of action for malicious prosecution, Syrus alleges that Kurz prosecuted his claim for unemployment benefits that would be taken from Syrus’s “reserve account” with knowledge that Kurz had not been terminated by Syrus and without believing his claim was valid. Syrus further alleges that Kurz acted with intentional, malicious, and oppressive disregard of Syrus’s rights and caused the company to suffer financial loss.

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B. Special Motion to Strike Under Section 425.16

In 2012, Kurz filed a special motion to strike the cross-complaint’s third cause of action for malicious prosecution. In his memorandum of points and authorities, Kurz argued that the filing of a claim for unemployment insurance benefits and the filings, statements, and correspondence in related proceedings before the EDD constituted constitutionally protected speech or petitioning activity that is subject to a special motion to strike under section 425.16.

Kurz also argued that his anti-SLAPP motion should be granted because Syrus could not establish a probability of prevailing on its malicious prosecution claim pursuant to section 1960, which provides that the findings of fact, conclusions, and final orders of the Unemployment Insurance Appeals Board cannot be used as evidence in any subsequent proceeding between an individual and his or her present or prior employer. Absent admissible evidence that Syrus had prevailed in Kurz’s appeal of the EDD decision denying him unemployment benefits, Kurz explained, Syrus could not satisfy the first element of a malicious prosecution claim by showing that a prior action had terminated in Syrus’s favor. Kurz also argued Syrus could not meet the other two elements of a malicious prosecution claim because he had probable cause to file a claim for unemployment insurance benefits and Syrus could not show that he had acted with malice.

C. Opposition to the Motion

Syrus argued that Kurz’s anti-SLAPP motion should be denied because it could establish a probability of prevailing on all three elements of the malicious prosecution claim. Relying on the decisions in Pichon v. Pacific Gas & Electric Co. (1989) 212 Cal.App.3d 488 [260 Cal.Rptr. 677] (Pichon) and Mahon v. Safeco Title Ins. Co. (1988) 199 Cal.App.3d 616 [245 Cal.Rptr. 103] (Mahon), Syrus first contended that section 1960 applies only in wrongful termination actions and does not preclude the admission of an Unemployment Insurance Appeals Board decision in a malicious prosecution action. Syrus therefore argued that it could show with admissible evidence that the proceedings before the Unemployment Insurance Appeals Board had terminated in Syrus’s favor.

Second, Syrus contended that it could show that Kurz brought his EDD claim without probable cause, since no reasonable person would believe that Kurz had a valid claim for unemployment insurance benefits when he was not an employee and his services were never terminated. Third, Syrus argued that the evidence showed that Kurz had prosecuted his EDD claim with ...


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