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Behunin v. Superior Court (Charles R. Schwab)

California Court of Appeals, Second District, Seventh Division

March 14, 2017

NICHOLAS BEHUNIN, Petitioner,
v.
THE SUPERIOR COURT OF LOS ANGELES COUNTY, Respondent CHARLES R. SCHWAB et al., Real Parties in Interest.

         ORIGINAL PROCEEDING in mandate. Los Angeles County Super. Ct. Nos. BC573709, BC574505 John P. Doyle, Judge. Petition denied.

          Harder Mirell & Abrams, Douglas E. Mirell; Elkin Gamboa & Ashkinadze and Regina Ashkinadze for Petitioner.

          No appearance for Respondent.

          Allen Matkins Leck Gamble Mallory & Natsis and Robert Moore for Real Party in Interest Charles R. Schwab.

          Law Offices of David H. Schwartz, Inc., David H. Schwartz; Law Offices of Michael Stepanian and Michael Stepanian for Real Party in Interest Michael Schwab.

          SEGAL, J.

         INTRODUCTION

         This action arises out of a lawsuit by Nicholas Behunin against Charles Schwab and his son Michael Schwab over an unsuccessful real estate investment deal. As part of a plan to induce the Schwabs to settle the lawsuit, Behunin's attorneys, Leonard Steiner and Steiner & Libo, engaged a public relations consultant, Levick Strategic Communications, to create a website containing information linking the Schwabs and their real estate investments in Indonesia to the family of former Indonesian dictator Suharto. In Charles Schwab's subsequent action against Behunin for libel and Michael Schwab's subsequent action against Behunin for libel, slander, and invasion of privacy, Behunin filed a special motion to strike under Code of Civil Procedure section 425.16. In response to that motion, the Schwabs sought discovery of communications among Behunin, Steiner, and Levick relating to the creation of the website and its contents. Behunin objected, claiming the communications were protected from disclosure by the attorney-client privilege.

         The questions in this proceeding are whether the communications among Behunin, Steiner, and Levick were confidential, attorney-client privileged communications and whether disclosure to Levick waived the privilege. We conclude that, although in some circumstances the attorney-client privilege may extend to communications with a public relations consultant, it did not do so in this case because Behunin failed to prove the disclosure of the communications to Levick was reasonably necessary for Steiner's representation of Behunin in his lawsuit against the Schwabs. Therefore, we deny Behunin's petition for a writ of mandate.

         FACTUAL AND PROCEDURAL BACKGROUND

         A. Behunin's Lawsuit Against the Schwabs

         Behunin, represented by Steiner, filed an action against the Schwabs relating to a business dispute over the creation and funding of a company called Sealutions, which Behunin and a business partner formed “to pursue environmentally conscious real estate investment and development, ” and a related real estate investment fund. Behunin alleged that to help establish the fund he and Michael Schwab pursued a relationship with the family of Suharto. Behunin asserted various causes of action, including fraud and breach of contract, relating to the Schwabs' purported promises to fund Sealutions. Behunin also described the details of the Schwabs' alleged relationship with members of the Suharto family.

         After filing the Sealutions lawsuit, Steiner hired Levick to create a social media campaign to induce the Schwabs to settle the case. As part of this strategy, Levick created a website, www.chuck-you.com, linking the Schwabs to corruption, human rights violations, and atrocities associated with Suharto and his family. In a letter to Steiner and Behunin, a senior vice president at Levick stated: “Per our discussion with your client, Nicholas Behunin, LEVICK's goal will be to develop and deploy strategy and tactics of Mr. Behunin's legal complaint.” The rest of the letter is redacted.[1]

         According to Behunin, “Steiner played no role in the creation or publication of [the chuck-you.com website].... [T]hat website and the content contained in the website were created by me and a public relations firm with which I was working. Steiner's only role was, at my specific request, to enter into a contract on my behalf with that public relations firm in connection with the prosecution of the [Sealutions action].... Steiner merely acted as a liaison between myself and the public relations firm without knowledge of or connection to the substance of the website. The website always has been and remains my sole and exclusive property.” Behunin also stated in a subsequent declaration the parties intended that all communications among Behunin, Steiner, and Levick would be protected by the attorney-client privilege and “all documents prepared on [Behunin's] behalf would be protected by the work-product privilege unless and until they entered the public domain.”

         B. The Schwabs' Defamation Actions Against Behunin and Steiner

         The Schwabs each filed an action against Behunin and Steiner. Charles Schwab asserted a cause of action for libel and alleged Steiner created and registered the “chuck-you.com” website. Charles Schwab further alleged he is informally known as Chuck, and the name of the website is a play on the words “fuck you.” Charles Schwab also alleged the website “stole the design and format of Charles Schwab & Co., Inc.'s investment services website ‘www.schwab.com' and then replaced its content with numerous false, misleading, and libelous statements about [Charles] Schwab. The entire Website was dedicated to trying to smear [Charles] Schwab's reputation by falsely associating him with infamous Indonesian dictator Suharto and the atrocities committed by his regime.”

         Michael Schwab asserted causes of action for libel, slander, and invasion of privacy and alleged the statements on the website “attempted to smear [him] by associating him with Tommy Suharto, a son of the former Indonesian dictator [who] also has been linked to corrupt activities and is a convicted murderer.” Michael Schwab further alleged the website falsely suggested the Schwabs were doing business with the dictatorial regime in Indonesia through the surviving members of Suharto's family, some of whom have been convicted of murder, bribery, and seizing land by force.

         C. Behunin's Special Motion To Strike the Schwabs' Complaints, the Court's Discovery Order, and the Ensuing Discovery Dispute

         Behunin filed a special motion to strike the Schwabs' defamation complaints under Code of Civil Procedure section 425.16. He argued the purpose of the Schwabs' lawsuits was to inhibit his constitutionally-protected petitioning activity of filing the Sealutions lawsuit against the Schwabs. Behunin's supporting declaration provided the details of extensive communications among Behunin, Michael Schwab, Charles Schwab, and various members of the Suharto family.

         In response to the special motion to strike, the Schwabs filed motions for limited discovery under Civil Procedure Code section 425.16, subdivision (g), [2] seeking to take discovery on the malice element of their defamation causes of action in connection with the statements on the website. The Schwabs sought to depose and obtain documents from Steiner, Behunin, and Levick regarding communications among the three of them relating to the website.

         The trial court ruled the Schwabs were entitled to some of the discovery they sought in order to oppose the special motion to strike. In particular, the court allowed Michael Schwab to serve a set of requests for production of documents on Steiner & Libo, a subpoena for a deposition and documents on Levick, and a business records subpoena on Bruce Fein, an attorney in Washington, D.C.[3] The court gave Charles Schwab permission to depose Steiner and Behunin and serve a subpoena for documents on Levick. The court limited the discovery to whether Behunin and Steiner published the statements on the website and, if so, whether they published the statements with malice.

         The Schwabs served discovery they believed the court gave them permission to serve. Charles Schwab served Behunin with 33 document requests regarding the website and communications among Behunin, Steiner, and Levick. He also served a subpoena on Levick for documents regarding the creation and publication of the website and its content. Michael Schwab served document requests regarding communications among Behunin, Steiner, Steiner & Libo, and Levick relating to the website or any of the entities involved in the Sealutions litigation. He also served a deposition subpoena on Levick with document requests regarding communications among Levick, Behunin, Steiner, and Bruce Fein concerning the website, Sealutions, and two apparently related entities, Seathos and Emergent Indonesia Opportunity Fund.

         Behunin and Steiner objected to the discovery on the grounds the requests exceeded the scope of the order authorizing discovery under Code of Civil Procedure section 425.16, subdivision (g), and sought documents protected from disclosure by the attorney-client privilege and work product doctrine. Behunin and Steiner also provided extensive privilege logs.

         The parties filed competing discovery motions. Steiner and Behunin moved for a protective order, arguing they intended all communications with Levick to be protected by the attorney-client privilege and work product doctrine, and claiming Steiner engaged Levick to create and execute legal strategies and tactics relating to Behunin's litigation. The Schwabs filed motions to compel the production of documents from Behunin and Steiner.

         The trial court referred the motions to a discovery referee, who summarized the ...


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