Clarity Co. Consulting, LLC v. Gabriel

• Court: California Court of Appeals
• Writing for the Court: YEGAN, J.
• Citation: Clarity Co. Consulting, LLC v. Gabriel, 77 Cal.App.5th 454, 292 Cal.Rptr.3d 532 (Cal. App. 2022)
• Decision Date: 12 April 2022
• Docket Number: 2d Civil No. B311823
• Parties: CLARITY CO. CONSULTING, LLC, Plaintiff and Respondent, v. Larry GABRIEL, Defendant and Appellant.

77 Cal.App.5th 454

292 Cal.Rptr.3d 532

CLARITY CO. CONSULTING, LLC, Plaintiff and Respondent,

v.Larry GABRIEL, Defendant and Appellant.

2d Civil No. B311823

Court of Appeal, Second District, Division 6, California.

Filed April 12, 2022

Jenkins Mulligan & Gabriel and Daniel J. Mulligan, for Defendant and Appellant.

Keller, Fishback & Jackson and Stephen M. Fishback, Dan C. Bolton ; The Arkin Law Firm and Sharon J. Arkin, for Plaintiff and Respondent.

YEGAN, J.

This appeal illustrates an attorney's misuse of the anti-SLAPP statute. ( Code of Civ. Proc. § 425.16.)¹ "[H]owever efficacious the anti-SLAPP procedure may be in the right case, it can be badly abused in the wrong one, resulting in substantial cost—and prejudicial delay." ( Grewal v. Jammu (2011) 191 Cal.App.4th 977, 981, 119 Cal.Rptr.3d 835.) This is the wrong case. Appellant was given more than adequate notice in the trial court that his anti-SLAPP motion was not designed for this contractual dispute. He has been given the same notice on appeal. The warnings should have given him pause. They did not.

What we said over twenty years ago is as true today as it was then: "[w]e ... observe that trial attorneys who prosecute their own appeals, such as appellant [and his law firm], may have ‘tunnel vision.’ Having tried the case themselves, they become convinced of the merits of their cause. They may lose objectivity and would be well served by consulting and taking the advice of disinterested members of the bar, schooled in appellate practice." ( Estate of Gilkison (1998) 65 Cal.App.4th 1443, 1449-1450, 77 Cal.Rptr.2d 463.)

Respondent Clarity Co. Consulting, LLC, and ONclick Healthcare, Inc. (ONclick), entered into a written contract whereby respondent agreed to provide services to ONclick on an hourly basis. ONclick "is a start-up health care company that was formed in 2019." Appellant Larry Gabriel, a licensed California attorney, is the General Counsel of ONclick.

ONclick did not pay for the services rendered. So respondent filed a complaint alleging an ordinary breach of contract action and related causes of action against ONclick, appellant, and other persons associated with ONclick. Acting in his individual capacity, appellant filed a special motion to strike the complaint as a strategic lawsuit against public participation (SLAPP). The other defendants did not join in the motion. The motion was denied. This appeal is from the trial court's orders denying the motion and awarding respondent its attorney fees as a sanction for making a frivolous anti-SLAPP motion. ( § 425.16, subd. (c)(1).)

Appellant contends that the trial court erroneously determined that he had failed to satisfy the first step of the anti-SLAPP statute, i.e., he had not made a prima facie showing that respondent's causes of action were based on protected activity. He also claims that the trial court abused its discretion in awarding attorney fees incurred by respondent in opposing the anti-SLAPP motion.²

We affirm. We grant respondent's motion for sanctions for taking a frivolous appeal. We order appellant and his counsel to pay sanctions of $12,798.50 to respondent and $8,500 to the clerk of this court.

Respondent's Complaint

The complaint alleged: "Defendants breached the contract [the contract between respondent and ONclick] ... by failing and refusing to pay for the services contemplated by Defendants and completed by [respondent]. Multiple demands for payment have been made. To date, no payment in any amount has been provided." Respondent claimed that it had "sustained damages in the minimum amount of $63,500.00." The prayer for relief requested both compensatory and punitive damages.

The complaint consisted of the following six causes of action, each of which was against all defendants: (1) breach of a written contract, (2) breach of an oral agreement, (3) unjust enrichment, (4) breach of a covenant of good faith and fair dealing, (5) intentional misrepresentation, and (6) concealment.

In his opening brief, appellant claims that his motion to strike was directed at only the fifth cause of action for intentional misrepresentation and the sixth cause of action for concealment. "[T]he [m]otion was not addressed to the breach of contract action." But appellant's motion to strike expressly recited that it was directed at respondent's "complaint in its entirety." Since appellant's briefs discuss only the fifth and sixth causes of action, we limit our analysis to these causes of action.

The fifth cause of action alleged that respondent had detrimentally relied on defendants’ misrepresentations concerning ONclick's financial health and "Defendants’ ability to pay for services ... provided by [respondent] pursuant to the Contracts." Defendants intentionally misrepresented that they "were not in financial jeopardy and that ONclick ... was financially sound and had secured significant investor financing to operate its business." Respondent was "deceived into believing that compliance with the terms of the Contracts would and could occur." "In furtherance of the fraudulent misconduct and in an attempt to secure the services of [respondent] ..., Defendants engaged in overt attempts to hire Jennifer McCoy, the President and Chief Executive Officer of [respondent], as full-time Chief Operating Office[r] of ONclick Healthcare, Inc.... [T]he ... [proposed] employment contract [was] valued in excess of $1,000,000 annually. All of these negotiations ... occurred while Defendants all knew, but failed to represent ... that Defendants had no ability to finance such a contract since there were no funds with which to do so.... [I]n reliance on the good faith and fair dealings which [respondent] assumed were occurring, [it] continued to perform work on behalf of Defendants despite never having been paid to date." Respondent "declined other opportunities from existing and potential clients which resulted in a loss of income ...."

The sixth cause of action alleged: "Defendants concealed from [respondent] certain information regarding the financial soundness and ability to pay for services which Defendants sought [respondent] to perform." The concealment was "a ruse designed to secure the services of [respondent] under false pretenses because Defendants could not operate without the work product created by and the services performed by [respondent]." Had respondent been aware that ONclick was in financial jeopardy, it "would not have engaged in the Contracts and/or would have taken additional safeguards to ensure payment for services contemplated and performed, such as advance payment for services."

Appellant's Motion to Strike

Appellant alleged that at all times he had acted "solely in his role as the general counsel of ONclick." "[H]e was not involved in the negotiations of the [service] contract with [respondent], is not a party to [that] contract and only became involved in negotiations with [respondent] as counsel for ONclick in an attempt to work out a long-term employment relationship between ONclick and [respondent's] CEO [Jennifer McCoy] ... by and through [respondent's] attorney, Stephen Fishback." "When the negotiations broke down, and Mr. Fishback was unhappy that ONclick refused to immediately pay [respondent] on its alleged invoices, Mr. Fishback threatened to sue [appellant] personally, without any factual basis for the claim whatsoever." "Mr Fishback ... also threatened to file a complaint with the State Bar against [appellant]." "The parties then engaged in settlement negotiations. Those negotiations failed.... In engaging in the [employment] contract negotiations and the settlement discussion, [appellant] was exercising his constitutionally protected rights."³

Trial Court's Ruling

In a minute order the trial court ruled: "The motion is denied. This is a breach of contract action based on the agreement [between respondent and ONclick]. [Appellant] is clearly annoyed at being sued, but his remedy is a demurrer and/or a motion for summary judgment.... Based on what was pleaded, this [SLAPP motion] should not have been filed. There may have been actionable words exchanged between counsel, but none of that has been pleaded. What is at issue is what is in the complaint, and that is nothing more than a breach of contract along with some related causes of action. Sanctions in the amount of $3,300 are awarded in favor of [respondent] ...."

The Anti-SLAPP Statute

"A SLAPP suit ... seeks to chill or punish a party's exercise of constitutional rights to free speech and to petition the government for redress of grievances. [Citation.] The Legislature enacted Code of Civil Procedure section 425.16 —known as the anti-SLAPP statute—to provide a procedural remedy to dispose of lawsuits that are brought to chill the valid exercise of constitutional rights." ( Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1055-1056, 39 Cal.Rptr.3d 516, 128 P.3d 713.)

"A court evaluates an anti-SLAPP motion in two steps.... [¶] ... The defendant's first-step burden is to identify the activity each challenged claim rests on and demonstrate that that activity is protected by the anti-SLAPP statute." ( Wilson v. Cable News Network, Inc. (2019) 7 Cal.5th 871, 884, 249 Cal.Rptr.3d 569, 444 P.3d 706 ( Wilson ).) "A defendant satisfies the first step of the analysis by demonstrating that the ‘conduct by which plaintiff claims to have been injured falls within one of the four categories described in subdivision (e) [of section 425.16 ]’ [citation], and that the plaintiff's claims in fact arise from that conduct [citation]. The four categories in subdivision (e) describe conduct ‘ "in furtherance of a person's right of petition or free speech under the United States or California Constitution in connection with a public issue." ’ ( § 425.16, subd. (e).)" ( Rand Resources, LLC v. City of Carson (2019) 6 Cal.5th 610, 619-620, 243 Cal.Rptr.3d 1, 433 P.3d 899.) "At this stage, the question is only whether a defendant has made out a prima facie case...