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Bergstein v. Stroock & Stroock & Lavan LLP

California Court of Appeals, Second District, Eighth Division

May 1, 2015

DAVID BERGSTEIN et al., Plaintiffs and Appellants,
STROOCK & STROOCK & LAVAN LLP et al., Defendants and Respondents.

APPEAL from orders of the Superior Court for the County Super. Ct. No. BC483164 of Los Angeles. Michael Linfield, Judge.

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Horvitz & Levy, Frederic D. Cohen, Felix Shafir, Jeremy B. Rosen; Weingarten Brown, Alex M. Weingarten and Eric J. Bakewell for Plaintiffs and Appellants.

Munger, Tolles & Olson, Brad D. Brian, Michael R. Doyen, Lisa J. Demsky and Manuel F. Cachan for Defendants and Respondents Stroock & Stroock & Lavan LLP and Daniel Rozansky.

Lewis Brisbois Bisgaard & Smith, Roy G. Weatherup; Parker Shumaker Mills and David B. Parker for Defendants and Respondents Levene, Neale, Bender, Yoo & Brill L.L.P., David Neale, Irving Gross and Beth Young.




The plaintiffs in this case (David Bergstein and affiliated business entities) sued the lawyers who represented their adversaries (David Molner and others) in litigation over various financial transactions. Plaintiffs asserted that the lawyers engaged in illegal conduct when they “solicited and received... confidential, privileged, and/or proprietary information” from plaintiffs’ former attorney, and used that information “in devising the legal strategy to be employed” in the litigation against plaintiffs.

The defendant lawyers filed a special motion to strike the complaint under Code of Civil Procedure section 425.16, the anti-SLAPP (strategic lawsuit against public participation) statute. The trial court granted the motion and awarded attorney fees to defendants. The court concluded the complaint arose from protected First Amendment activity; there was insufficient evidence to show defendants’ conduct was illegal as a matter of law; and plaintiffs did not show a probability of prevailing on their claims, both because the statute of limitations had run and because the litigation privilege barred plaintiffs’ claims.

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We affirm the trial court’s orders.


1. The Background

Plaintiffs are involved in acquiring, producing and distributing motion pictures, as well as in commercial transactions in other business sectors. Their activities require the involvement of entities or individuals willing to provide financing. David Molner and entities he controlled (Aramid Entertainment Fund Limited and others (Aramid)) participated in a number of financial transactions relating to plaintiffs’ film production and distribution business, making a series of loans to plaintiffs from 2007 to 2009.

In 2009, the business relationship between plaintiffs and Aramid became “highly adversarial.” Molner and Aramid hired defendants – Stroock and Stroock and Lavan LLP and its partner, Daniel Rozansky, and Levene Neale Bender Yoo & Brill L.L.P. and its partners, David Neale, Irving Gross, and Beth Young – to represent them in litigation against plaintiffs. (Plaintiffs describe this as “Molner’s and Aramid’s war” and a “ ‘fight to the death’ litigation struggle [that] spawned numerous lawsuits” in California, New York, and elsewhere.) The Levene Neale firm was “to craft and institute involuntary bankruptcy proceedings against Plaintiffs and affiliated entities, ” and the Stroock firm was “to construct and implement a litigation strategy against Plaintiffs and affiliated entities that involved filing a series of lawsuits at or about the same time as the involuntary bankruptcy proceedings were initiated.”

Attorney Susan Tregub was plaintiff Bergstein’s lawyer for over a decade, and she represented the other plaintiff entities as well. She was intimately familiar with and had access to plaintiffs’ confidential, privileged and proprietary information, including core operating and financial documents, electronic records and other records, and was the custodian of critical documents related to plaintiffs. She effectively served as plaintiffs’ general counsel, maintaining an office in the same suite with some of the plaintiff companies, and was paid a monthly retainer.

In late 2009, Ms. Tregub and plaintiff Bergstein had a falling out over fees, and Ms. Tregub “threatened [Mr. Bergstein] that ‘she would bring [him] down.’ ”

On March 16, 2010, Aramid, represented by the Stroock firm, sued plaintiff Bergstein for breach of personal guarantees given to secure loans from Aramid, and at about the same time, the Levene Neale firm, on behalf of

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creditors including Aramid, filed involuntary bankruptcy petitions against affiliated entities of plaintiffs.

Ms. Tregub, despite her previous (and to some extent continuing) representation of plaintiffs, began working for Aramid and David Molner in November or December 2009. She “coordinated and organized” the filing of the involuntary bankruptcy proceedings, and she assisted Aramid in the litigation against plaintiffs “arising out of loan transactions in which she had been directly involved even though Aramid’s interests were clearly directly adverse” to plaintiffs’ interests.

On March 25, 2010, Mr. Bergstein and other plaintiffs sued Ms. Tregub for breach of fiduciary duty and professional negligence, ultimately (in August 2012) obtaining a multimillion dollar verdict and punitive damages.

2. The Complaint

On April 20, 2012, two years or so after filing suit against Ms. Tregub, plaintiffs filed this lawsuit against defendants, alleging causes of action for aiding and abetting Ms. Tregub’s breach of fiduciary duty; interference with contractual relations and prospective economic advantage; and unjust enrichment. In addition to the facts we have just recited and other colorful but irrelevant matters, the complaint alleged, by way of introduction, that: “In the course of their representation [of Aramid], ” defendants “knowingly used the confidential, privileged, and/or proprietary information of Plaintiffs and affiliated entities to carry out a litigation attack” on plaintiffs. Defendants “solicited and received this confidential, privileged, and/or proprietary information from Susan Tregub, Plaintiffs’ former attorney.” Ms. Tregub “admittedly concealed material evidence at Defendants’ direction.”

“During the period prior to the filing of legal proceedings against [plaintiffs], Defendants received a steady flow of confidential, privileged, and/or proprietary information [from] Tregub to assist them in their efforts. They exchanged drafts of pleadings with her, emailed back and forth about various issues, and participated in telephone conference calls and in person meetings while Tregub was present.... Defendants knowingly received from Tregub confidential, privileged, and/or proprietary information about Bergstein, his business dealings, and the various entities through which he conducted business. Defendants knowingly used Tregub’s assistance in devising the legal strategy to be employed against Bergstein.... They used Tregub to obtain documents, identify witnesses, and solicit potential creditors....”

“Defendants’ actions have caused Plaintiffs to be involved in lengthy, protracted, contentious, and expensive legal proceedings.... [T]he litigations, litigation fees and costs, resources devoted to the litigations, and

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negative publicity accompanying the litigations have resulted in nearly incalculable injury and damage to Plaintiffs’ business interests....”

The substantive allegations of the complaint appear in paragraphs 45 through 145 of the complaint. Part I allegations (¶¶ 45-53) describe the background giving rise to the underlying litigation (described ante). Part II and Part III allegations (¶¶ 54-110) describe, respectively, defendants’ preparation for “a litigation war” against plaintiffs (¶¶ 54-71) and defendants’ improper use of plaintiffs’ confidential information, in preparation for the litigation and after it was filed (¶¶ 72-110). Part IV allegations describe plaintiffs’ lawsuit against Ms. Tregub for professional negligence and breach of fiduciary duty and defendants’ resistance to discovery demands in that lawsuit (¶¶ 111-120). Part V allegations allege defendants’ knowledge of Ms. Tregub’s representation of plaintiffs (¶¶ 121-127), and Part VI allegations describe plaintiffs’ damages (¶¶ 128-145).

We begin with a sampling of the substantive allegations of the complaint. Plaintiffs allege: “Aramid and Defendants began working with Tregub to initiate legal proceedings against Plaintiffs beginning in November or December 2009.” This involved two projects, a “master complaint” against Mr. Bergstein and several affiliated entities and the involuntary bankruptcy petitions. Both projects involved defendants’ “knowing solicitation, receipt, and use” of plaintiffs’ confidential, privileged, and/or proprietary information.

“Prior to December 2009, Stroock and Rozansky began drafting the Master Complaint.” Ms. Tregub revised the draft, and “[b]y working on and assisting with the preparation of the Master Complaint, Tregub provided confidential... information about Plaintiffs to Stroock and Rozansky, ” who “took and used this confidential... information without Plaintiff’s consent....”

“During the preparation of the Master Complaint, Stroock and Rozansky... invited Tregub to attend strategy sessions, ” at which they “strategized about ways to put maximum pressure on Plaintiffs including by the litigation contemplated in the Master Complaint and parallel bankruptcy proceedings.”

Stroock and Rozansky used the master complaint containing plaintiffs’ confidential information “as the basis for the complaints they intended to file”; solicited advice and support from the Levene Neale defendants “regarding the planned litigation for Aramid”; and “[u]ltimately, Stroock and Rozansky, on behalf of Aramid and working in conjunction with Tregub, filed multiple lawsuits in federal and state court against certain Plaintiffs.”

“As Stroock and Rozansky knew, the factual information supporting the claims that were asserted... were derived from the Master Complaint that Tregub... and Defendants drafted....”

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“In addition, Defendants participated in preparing papers in [another action] seeking a temporary restraining order, ” and “Rozansky sought and received from Tregub information regarding the relationships between Bergstein [and others], ” as well as “documents... that Tregub obtained while she represented Plaintiffs.”

Ms. Tregub also “worked hand-in-hand” with defendants Levene Neale and its partners “to prepare petitions, motions, and other papers necessary to force the entities affiliated with Bergstein into involuntary bankruptcy.” The complaint then describes the consultations and communications between Ms. Tregub and the Levene Neale firm, and alleges the firm’s solicitation and use of the information Ms. Tregub provided, including preparation of a master strategy memorandum, identification of entities to be placed in bankruptcy, and communications on that subject. In addition, the Levene Neale firm “orchestrated the improper purchase of a claim against entities affiliated with Plaintiffs, ” for use in the involuntary bankruptcy proceedings, by working with Ms. Tregub and using confidential information she provided; the complaint gives examples of communications on this topic.

A Levene Neale partner worked with and directed Ms. Tregub in contacting former employees of plaintiff-affiliated entities to prepare declarations in support of an emergency order appointing a trustee. Levene Neale filed the bankruptcy petitions and motion; communicated with Ms. Tregub on strategy; and so on. The complaint describes other efforts by the Stroock firm, involving involuntary bankruptcy proceedings in other jurisdictions, to acquire claims against another company to which Mr. Bergstein had lent millions of dollars, and to “scour[] the globe to locate other potential creditors” of that company.

The complaint also alleges that after months of participating in communications involving Ms. Tregub, defendants attempted to hide their conduct by forwarding emails to and from Ms. Tregub through an intermediary, using a “pivot and pass” strategy, with Ms. Tregub proving information to Aramid, and Aramid forwarding the information to defendants.

Defendants “continued to assist Tregub in breaching her duties even after [the various lawsuits] were filed.”

The complaint then describes the lawsuit plaintiffs filed against Ms. Tregub on March 25, 2010, for professional negligence and breach of fiduciary duty (the Tregub case); their requests for discovery from Ms. Tregub and subpoenas for documents from defendants; and defendants’ “repeated refusals... to abide by their discovery obligations in the Tregub ...

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