Bergstein v. Stroock & Stroock & Lavan LLP

• Citation: 236 Cal.App.4th 793,187 Cal.Rptr.3d 36
• Decision Date: 01 May 2015
• Docket Number: B244896
• Court: California Court of Appeals
• Parties: David BERGSTEIN et al., Plaintiffs and Appellants, v. STROOCK & STROOCK & LAVAN LLP et al., Defendants and Respondents.

236 Cal.App.4th 793

187 Cal.Rptr.3d 36

David BERGSTEIN et al., Plaintiffs and Appellants

v.STROOCK & STROOCK & LAVAN LLP et al., Defendants and Respondents.

B244896

Court of Appeal, Second District, Division 8, California.

Filed May 1, 2015

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

Munger, Tolles & Olson, Los Angeles, 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, Los Angeles, for Defendants and Respondents Levene, Neale, Bender, Yoo & Brill L.L.P., David Neale, Irving Gross and Beth Young.

GRIMES, J.

SUMMARY

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.

We affirm the trial court's orders.

FACTS

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 & Stroock & 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 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 Aug. 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, e-mailed 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 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....”“In addition, De...