Kelly v. Kelly
| Decision Date | 26 January 2023 |
| Docket Number | A164293 |
| Parties | THOMAS P. KELLY III, Cross-complainant and Respondent, v. JOHN A. KELLY, Cross-defendant and Appellant. |
| Court | California Court of Appeals Court of Appeals |
NOT TO BE PUBLISHED
Sonoma County Super. Ct. No. SCV-267688
John A Kelly (John) appeals from an order denying his special motion to strike Thomas P. Kelly III's (Thomas) cross-complaint pursuant to Code of Civil Procedure[1] section 425.16 (the anti-SLAPP[2] statute). John contends the trial court erred in ruling that the anti-SLAPP statute did not apply to Thomas's cross-claims for breach of fiduciary duty and fraud. We conclude John met his burden to show that Thomas's cross-claim for fraud arose, in part, from protected litigation activity and Thomas did not meet his burden to show a probability of prevailing as to that cross-claim. Accordingly, we will affirm in part and reverse in part the trial court's order.
As John notes in his opening brief, this is a family trust dispute involving a family filled with lawyers.[3] We discuss only those facts relevant to the issues on appeal.
John and Thomas's father, Thomas P. Kelly, Jr. (decedent), was a lawyer in Santa Rosa. In 1999, decedent established his revocable trust, the Thomas P. Kelly, Jr. Trust-1999 (Trust). His wife, Joyce, is the sole beneficiary of the Trust during her lifetime, and the couple's three children, Thomas, John, and Heather, each of whom are lawyers, are the remainder beneficiaries of the Trust.
Decedent died on February 24, 2020. Upon his death, decedent's brother, William B. Kelly (William), became trustee of decedent's Trust. When he died, decedent held a legal malpractice insurance policy through Lawyers' Mutual Insurance Company (Lawyers' Mutual) with a $1.5 million aggregate policy limit.
About a month before decedent died, Thomas contacted Lawyers' Mutual by e-mail to inform the company of a potential malpractice claim against decedent by three of his former clients.[4] Thomas forwarded his e-mail to Hugh Rice Kelly (Hugh) and James Tynan Kelly (James), both also brothers of decedent, who are lawyers in Texas.[5] Lawyers' Mutual responded by letter to confirm receipt of the information about the potential malpractice claim.[6]
About a month after decedent died, Thomas informed Lawyers' Mutual by letter and e-mail that his father had died. His e-mail requested "the closing of [decedent's] account and related malpractice policy." Thomas copied William, Hugh, and James on the e-mail. The next day, Hugh sent a response stating: Later the same day, James e-mailed Thomas, Hugh, and William to "second Hugh's comment," advising that Thomas retain "malpractice insurance in place pending [William's] qualification as executor &or trustee," and suggesting he "send an email countermanding this email."
Thomas responded via e-mail to Hugh and copied William and James. In his e-mail, Thomas wrote: James replied to Thomas's e-mail and copied William and Hugh. James expressed concern about the insurance coverage and requested Thomas's "fully reasoned legal memorandum &supporting case & statutory law in support." Alternatively, he "strongly recommend[ed]" that Thomas rescind his notice of cancellation, let William pay the premium, and let William and his lawyers "sort the matter out." Thomas responded:
On March 30, 2020, a representative of Lawyers' Mutual responded to Thomas's letter by e-mail. The e-mail stated Lawyers' Mutual was "processing cancellation of his E&O coverage, effective 2/24/2020" and attached an "Extended Reporting Period Endorsement (a.k.a., tail) quote . . . for [his] review and use." The e-mail gave instructions for steps to follow to purchase tail coverage. Thomas forwarded the e-mail to William, Hugh, and James, and wrote: Thomas sent a second email stating: "[T]he policy apparently terminates upon the death of the insured with tail coverage available per the prior e-mail." James responded:
In May 2020, William commenced proceedings in probate court in Sonoma County to probate decedent's will and appoint William as personal representative. William was represented in the probate matter by Joseph Piasta.
About two months later, in July 2020, Piasta wrote to Thomas's counsel[7] that he had received notice of a potential malpractice claim against decedent by a former client, Oak Grove Construction Co., Inc. (Oak Grove).
Piasta attached a letter from Oak Grove's attorney outlining allegations of professional negligence against decedent related to his representation of Oak Grove in a lawsuit in Marin County. Thomas sent a copy of the e-mail and attached letter regarding Oak Grove's claim to Lawyers' Mutual, receipt of which the insurance company acknowledged. The next month, John replaced Piasta as counsel for William.
In late November 2020, counsel for Oak Grove filed creditors' claims by Oak Grove and its owner in an amount "estimated to exceed one million dollars" in decedent's probate matter. The next month, Thomas sent an email to Lawyers' Mutual requesting an update as to the current status of the potential claim by Oak Grove. Lawyers' Mutual did not respond.
A short while later, John, as counsel for William, sent a letter to Attorney Wayne Littlefield, counsel for Lawyers' Mutual. In the letter, John told Littlefield to direct any inquiries about the Oak Grove claim to him. He also wrote: "I recommend that if [Thomas] contacts you further, you direct him to me."
In January 2021, Oak Grove, filed a complaint against William, as trustee of the Trust, and Joyce, Thomas, John, and Heather, as beneficiaries, alleging causes of action for legal malpractice, breach of contract, and breach of fiduciary duty for alleged legal malpractice by decedent. A couple of weeks later, Thomas called Littlefield concerning Oak Grove's claim. In their phone conversation, Littlefield told Thomas that tail coverage had not been purchased for decedent's malpractice policy and the Oak Grove claim was denied by Lawyers' Mutual as a result. Thomas sent a follow-up e-mail to Littlefield, requesting that Littlefield send the "correspondence denying the claim so I can see what happened." He further stated: "It appears that [William] elected not to purchase the tail coverage hence the denial of the claim." Littlefield did not respond to the e-mail.
The following month, Thomas spoke by phone with Oak Grove's counsel, Nathaniel Lipanovich. During this conversation, Lipanovich revealed that John had sent him correspondence from Littlefield, counsel for Lawyers' Mutual, denying coverage for Oak Grove's claim. When Thomas asked Lipanovich to send him a copy of the coverage denial letter, Lipanovich refused, saying that John sent him the letter "on the explicit condition . . . that it not be disclosed to [Thomas]." Thomas followed up with an e-mail repeating his request for a copy of the coverage denial letter. Thomas wrote to Lipanovich that John and William were "deliberately withholding that letter from [him]" and noted "[t]he document is not subject to any privilege." Thomas further wrote: "I understand you had some form of agreement with [John] not to release it, but given that you have initiated a lawsuit in this matter, I do not see how that is enforceable under these conditions." On March 16, 2021, Thomas received a copy of the coverage denial letter from Lawyers' Mutual in response to his discovery request in the Oak Grove matter.
On March 22, 2021, Thomas filed the verified cross-complaint at issue in this appeal, asserting causes of action for breach of fiduciary duty and fraud against William and John.[8] Thomas alleged that William, as trustee of the Trust, had a fiduciary duty to administer the Trust with care, and that John, as counsel for William, had an affirmative fiduciary duty to keep the beneficiaries of the Trust reasonably informed of the Trust and its administration pursuant to Probate Code section 16060. Thomas alleged that William breached his fiduciary duty by failing to secure tail coverage for the Trust against potential malpractice claims, subjecting the Trust to Oak Grove's claim, and John breached his fiduciary duty by failing to inform Thomas of the status of the Oak Grove claim. The cross-complaint further alleged that John actively concealed the status of the Oak Grove claim by instructing Lawyers' Mutual, through Littlefield, not to discuss the matter with Thomas and by instructing Lipanovich not to release the insurance denial letter from Lawyer's Mutual.
The fraud cross-claim was based on similar allegations, but additionally alleged that John (and William) never informed Thomas about and sought to conceal from him the failure to secure malpractice coverage through the tail quote. Thomas further...
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