Aetna Inc. v. Whatley Kallas, LLP

• Decision Date: 16 July 2020
• Docket Number: B292572
• Parties: AETNA INC., Plaintiff and Appellant, v. WHATLEY KALLAS, LLP, et al., Defendants and Respondents.
• Court: California Court of Appeals Court of Appeals

AETNA INC., Plaintiff and Appellant, v. WHATLEY KALLAS, LLP, et al., Defendants and Respondents.

B292572

COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION SEVEN

July 16, 2020

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Los Angeles County Super. Ct. No. BC707386)

APPEAL from an order of the Superior Court of Los Angeles County, Richard E. Rico, Judge. Reversed.

Manatt, Phelps & Phillips, Matthew P. Kanny and Benjamin G. Shatz for Plaintiff and Appellant.

Thompson Coburn, Jeffrey N. Brown, Kacey R. Riccomini and J. David Duffy for Defendant and Respondent Whatley Kallas, LLP.

Strumwasser & Woocher, Fredric D. Woocher, Michael J. Strumwasser and Caroline Chiappetti for Defendant and Respondent Consumer Watchdog.

INTRODUCTION

Whatley Kallas, LLP and Consumer Watchdog filed two lawsuits against Aetna Inc. on behalf of certain members of Aetna. The parties settled those lawsuits and hired a settlement administrator to give notice of the settlement to Aetna's members. When mailing the notices, the settlement administrator used the wrong kind of envelopes and inadvertently disclosed personal health information about Aetna's members, which prompted some of Aetna's members to sue Aetna again. The members, however, did not sue the settlement administrator, Whatley Kallas, or Consumer Watchdog.

After settling the new lawsuits, Aetna filed this action against Whatley Kallas and Consumer Watchdog for indemnity and contribution. Whatley Kallas and Consumer Watchdog filed special motions to strike under Code of Civil Procedure section 425.16 (section 425.16), which the trial court granted. Because Aetna's causes of action for indemnity and contribution are based on alleged professional negligence by Whatley Kallas and Consumer Watchdog, they are not subject to section 425.16. Therefore, we reverse.

FACTUAL AND PROCEDURAL BACKGROUND

A. Aetna Files This Action Against Whatley Kallas and Consumer Watchdog for Indemnity and Contribution

In 2014 and 2015 Whatley Kallas and Consumer Watchdog filed two putative class actions on behalf of certain members of Aetna against Aetna and one of its affiliates, alleging Aetnaunlawfully required its members to obtain HIV medication by mail (the Doe actions). The parties settled the Doe actions in 2017. The settlement provided that certain members of Aetna would receive a notice in the mail advising them of their options when filling prescriptions for HIV medication.

Kurtzman Carson Consultants (KCC) was retained as the settlement administrator.¹ On July 28, 2017 KCC mailed the notices to 12,000 members of Aetna "using envelopes with see-through address windows" instead of windowless envelopes. After KCC mailed the notices, Aetna received complaints from some members claiming the windowed envelopes revealed the words "HIV medications" next to the members' names and addresses. Several members filed new lawsuits against Aetna, which were consolidated into a single action (the Beckett action). In January 2018 Aetna agreed to pay $17 million to settle the Beckett action.

In May 2018 Aetna filed this action against Whatley Kallas and Consumer Watchdog for equitable indemnity, contribution, and declaratory relief.² Aetna alleged that Whatley Kallas engaged KCC to administer the Doe settlement and that Whatley Kallas and Consumer Watchdog supervised KCC in preparing and mailing the notices. Aetna alleged that, because Whatley Kallas and Consumer Watchdog negligently failed to "review the final proofs of the envelopes that would be used to send the[n]otices," KCC mailed the notices in windowed envelopes that purportedly revealed the members' health information. Aetna alleged it was entitled to indemnity and contribution from Whatley Kallas and Consumer Watchdog for liability arising from the mailing, including for Aetna's settlement of the Beckett action, because, "[a]s counsel for the Plaintiffs in the [underlying] [l]awsuits tasked with administering the [s]ettlement," Whatley Kallas and Consumer Watchdog "assumed and undertook a duty to protect the putative class of Aetna [m]embers." Aetna alleged Whatley Kallas and Consumer Watchdog breached that duty by allowing KCC to mail the improper notices.

B. The Trial Court Grants Special Motions To Strike by Whatley Kallas and Consumer Watchdog

Whatley Kallas and Consumer Watchdog filed special motions to strike under section 425.16. They contended their administration of the Doe settlement was protected litigation activity under section 425.16. They further contended Aetna could not demonstrate a probability of prevailing on their causes of action because the litigation privilege in Civil Code section 47, subdivision (b), barred each of Aetna's causes of action and because a third party cannot seek indemnity against opposing counsel based on counsel's alleged legal malpractice. Aetna argued that section 425.16 does not apply to an attorney's alleged breach of professional duties and that, because Aetna's indemnity and contribution causes of action were "premised on [Whatley Kallas's and Consumer Watchdog's] breaches of duty," the causes of action did not arise from protected activity. Aetna also argued that neither the litigation privilege nor any other defense barred its causes of action.

The trial court granted the special motions to strike. In the first step of the section 425.16 analysis, the court ruled Aetna's causes of action arose from representation by Whatley Kallas and Consumer Watchdog of their clients during the administration of the Doe settlement and that section 425.16 "extends to activities in connection with the . . . implementation[ ] and enforcement of a settlement agreement." In the second step, the trial court ruled Aetna could not demonstrate a probability of prevailing on its causes of action because the settlement-related conduct of Whatley Kallas and Consumer Watchdog was "indisputably" subject to the litigation privilege in Civil Code section 47. Aetna timely appealed.

DISCUSSION

A. Applicable Law and Standard of Review

Section 425.16, subdivision (b)(1), provides that "[a] cause of action against a person arising from any act of that person in furtherance of the person's right of petition or free speech under the United States Constitution or the California Constitution in connection with a public issue shall be subject to a special motion to strike, unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim." Courts evaluate special motions to strike under section 425.16 "through a two-step process. Initially, the moving defendant bears the burden of establishing that the challenged allegations or claims 'aris[e] from' protected activity in which the defendant has engaged. [Citations.] If the defendant carries its burden, the plaintiff must then demonstrate its claims have at least 'minimal merit.'" (Park v. Board of Trustees ofCalifornia State University (2017) 2 Cal.5th 1057, 1061 (Park); see Zhang v. Jenevein (2019) 31 Cal.App.5th 585, 592.) "'We review de novo the grant or denial of'" a special motion to strike under section 425.16. (Sweetwater Union High School Dist. v. Gilbane Building Co. (2019) 6 Cal.5th 931, 940; see Park, at p. 1067.)

B. Aetna's Causes of Action Do Not Arise from Protected Speech or Petitioning Activity Under Section 425.16

1. Section 425.16 Does Not Apply to Legal Malpractice Causes of Action

Generally "an attorney's 'litigation-related activities' . . . constitute acts in furtherance of a person's right of petition" for purposes of section 425.16. (Sprengel v. Zbylut (2015) 241 Cal.App.4th 140, 151 (Sprengel); see Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1056; Optional Capital, Inc. v. Akin Gump Strauss, Hauer & Feld LLP (2017) 18 Cal.App.5th 95, 113; but see Old Republic Construction Program Group v. The Boccardo Law Firm, Inc. (2014) 230 Cal.App.4th 859, 874 [section 425.16 does not apply to an attorney's noncommunicative litigation activity unless the activity is "'"in connection with a public issue or an issue of public interest"'"].) This court in Sprengel, however, joined a long line of cases holding "malpractice claims that challenge the competency of an attorney's legal services are not subject to section 425.16 because, in such cases, 'the client is not suing because the attorney petitioned on his or her behalf, but because the attorney did not competently represent the client's interests while doing so.'" (Sprengel, at pp. 154-155; accord, Kolar v. Donahue, McIntosh & Hammerton (2006) 145Cal.App.4th 1532, 1540; see Yeager v. Holt (2018) 23 Cal.App.5th 450, 457 ["a typical attorney malpractice suit is not subject to" section 425.16]; Robles v. Chalilpoyil (2010) 181 Cal.App.4th 566, 578-579 ["section 425.16 does not shield statements made on behalf of a client who alleges negligence in the defendant's representation of the client or breach of the duty of loyalty"]; Jespersen v. Zubiate-Beauchamp (2003) 114 Cal.App.4th 624, 632 (Jespersen) [section 425.16 does not apply to "garden-variety attorney malpractice" action based on an attorney's failure to comply with discovery statutes and court orders].)

These cases recognize that the Legislature did not intend the anti-SLAPP statute to apply to legal malpractice actions. "'"SLAPP" is an acronym for "strategic lawsuit against public participation."'" (Monster Energy Co. v. Schechter (2019) 7 Cal.5th 781, 785, fn. 1.) When lawyers make a mistake like the one Aetna claims the lawyers made here, they are not doing or participating in anything public. If the mistake is below the standard of care, the lawyers are simply committing malpractice. As the...