Judge William A. Crowfoot, Case Number: 23PSCV03971, Date: 2024-08-23 Tentative Ruling

Judge: William A. Crowfoot, Case: 23PSCV03971, Date: 2024-08-23 Tentative Ruling

On December 22, 2023, plaintiff Claudia Topete (“Plaintiff”) filed this action asserting two causes of action for malicious prosecution against defendants Avo Asdourian, Marlene Asdourian, Sarkis Paronyan (“Paronyan”), Paronyan Law Firm APC (“Paronyan Law”), and Legal Aid, Inc. (“Legal Aid”). The malicious prosecution asserted by Plaintiff are lawsuits brought in Federal and California State Court by Avo Asdourian and Marlene Asdourian (collectively, “the Asdourians”) that are defined below as the Federal Court Action and the Second State Court Action. The Federal Court Action was dismissed by the district court and the Second State Court Action was dismissed by the Asdourians.

Paronyan, Paronyan Law, and Legal Aid (collectively, “Attorney Defendants”) move to strike the complaint pursuant to Code of Civil Procedure section 426.16 (the “anti-SLAPP statute”). Contrary to Plaintiff’s claim that the motion violates CRC rule 3.1113, the memorandum of points and authorities does not exceed 15 pages when excluding the caption page, notice of motion, table of contents and table of authorities, and the proof of service.

By way of background, the Asdourians are husband and wife who previously sold their accounting and tax preparation practice called Virtual Tax Accountant (“VTA”) to Plaintiff on September 16, 2019. On October 29, 2020, Plaintiff filed an action in Los Angeles County Superior Court, Case No. 20GDCV00922, against the Asdourians for breach of contract, fraud, and negligent misrepresentation arising from the sale of VTA (the “Original State Court Action”). The Asdourians filed a cross-complaint against Plaintiff asserting a cause of action for unauthorized computer access and fraud relating to Plaintiff’s discovery of VTA’s tax returns as well as the Asdourians’ personal tax returns. The cross-complaint also contained other claims, including breach of contract, non-payment, declaration relief, breach of the implied covenant of good faith and fair dealing, fraud, and breach of fiduciary duty.

The Original State Court Action was litigated for nearly 3 years, during which the Asdourians filed an action in the United States District Court, Central District of California, case no: 2:22-cv-08238 (the “Federal Court Action”). The complaint in the Federal Court Action was filed on November 10, 2022, and included three federal claims brought under the Internal Revenue Code and two state law claims for disclosure of tax return data and public disclosure of private facts. The Asdourians were represented in the Federal Court Action by Paronyan and Paronyan Law Firm. On March 6, 2023, the District Court granted Plaintiff’s motion to dismiss and dismissed the Asdourians’ federal claims with prejudice. The District Court’s order specified that two of the federal claims were improperly premised on provisions of the Internal Revenue Code which did not provide a private right of action and the third federal claim failed because the complaint affirmatively alleged that the tax return information was not obtained from the Internal Revenue Service.

After the Federal Court Action was dismissed, the Original State Court Action went to trial from May 15 through May 31, 2023. The jury returned a verdict in Plaintiff’s favor on her contract and fraud claims and found against the Asdourians on all claims in their cross-complaint, including the claim for unauthorized computer access and fraud.

Six weeks after trial in the Original State Court Action concluded, on July 21, 2023, the Asdourians filed a complaint in the Los Angeles County Superior Court, Case No. 23PSCV02208 (“Second State Court Action”). The Asdourians, represented by Paronyan and Legal Aid, alleged claims for professional negligence, disclosure of tax return data, and common law public disclosure of private facts, arising from Plaintiff’s discovery and disclosure of their tax returns.

Meanwhile, in the Original State Court Action, Plaintiff and the Asdourians were involved in post-trial motion practice and on October 17, 2023, the court granted the Asdourians’ motion for a new trial in part and scheduled a new trial on the limited subject of damages.

On November 14, 2023, the Original State Court Action and Second State Court Action were deemed related. On December 5, 2023, Paronyan served Plaintiff with a copy of the request for dismissal of the Second State Court Action.

In assessing a defendant’s section 425.16 special motion to strike, the court must engage in a two-step process. (Shekhter v. Financial Indem. Co. (2001) 89 Cal.App.4th 141, 150.) First, the court must decide whether the defendant has met the threshold burden of showing that the plaintiff’s cause of action arises from the defendant’s constitutional rights of free speech or petition for redress of grievances. (Id.) This burden may be met by showing the act which forms the basis for the plaintiff's cause of action was an act that falls within one of the four categories of conduct set forth in 425.16(e).

If the defendant meets his initial burden, then the burden shifts to the plaintiff to establish a probability that the plaintiff will prevail on the claim—i.e., present facts which would, if proved at trial, support a judgment in the plaintiff’s favor. (Id. at 15051.) In ruling on the anti-SLAPP motion, the court shall consider the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based. (Code Civ. Proc., § 425.16(b)(2).) However, the court does not “weigh credibility [nor] compare the weight of the evidence. Rather, [the court] accepts as true the evidence favorable to the plaintiff and evaluates the defendant’s evidence only to determine if it has defeated that submitted by the plaintiff as a matter of law.” (Flatley v. Mauro (2006) 39 Cal.4th 299, 326.)

Attorney Defendants’ request for judicial notice of records in the Original State Court Action and Second State Court Action is GRANTED. (Evid. Code, § 352(d).)

The Court first addresses the Attorney Defendants’ claim that this action must be dismissed on public policy grounds because the attorney-client privilege would hinder their ability to conduct a proper defense and the Asdourians have not waived the attorney-client privilege. No authority establishes that malicious prosecution cases against counsel are automatically subject to dismissal and Attorney Defendants do not show that they are unable to defend themselves without using privileged information. (See General Dynamics Corp. v. Superior Court (1994) 7 Cal.4th 1164, 1190 [“[W]hether the privilege serves as a bar to the plaintiff's recovery will be litigated and determined in the context of motions for protective orders or to compel further discovery responses, as well as at the time of a motion for summary judgment.”])

“To prevail on an anti-SLAPP motion, the movant must first make ‘a threshold showing the challenged cause of action’ arises from an act in furtherance of the right of petition or free speech in connection with a public issue.” (Varian Medical Systems, Inc. v. Delfino (2005) 35 Cal.4th 180, 192.) “A claim arises from protected activity when that activity underlies or forms the basis for the claim.” (Park v. Board of Trustees of California State University (2017) 2 Cal.5th 1057, 1062.) “‘The only means specified in section 425.16 by which a moving defendant can satisfy that [‘arising from’] requirement is to demonstrate that the defendant’s conduct by which plaintiff claims to have been injured falls within one of the four categories described in subdivision (e) . . . .’” (Id. [quoting Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 66].) “[I]n ruling on an anti-SLAPP motion, courts should consider the elements of the challenged claim and what actions by defendant supply those elements and consequently form the basis for liability.” (Id.)

With respect to this first prong, Attorney Defendants meet their burden to show that Plaintiff’s claims for malicious prosecution fall under the anti-SLAPP statute’s protection because the claims are based on the Attorney Defendants’ statements or writings made before a judicial proceeding. (Code Civ. Proc., § 425.16, subd.(e)(1); Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 734-735.)

Plaintiff concedes that filing a complaint in court is a form of petitioning activity but argues that the Federal and Second State Court Actions constitute “baseless litigation” which, according to McDonald v. Smith (1985) 472 U.S. 479, 484, “is not immunized by the First Amendment right to petition.” (Opp., p. 6.) McDonald does not interpret the scope of an anti-SLAPP statute, but, rather, the Petition Clause of the First Amendment. Further, Plaintiff’s citation to Vargas v. City of Salinas (2011) 200 Cal.App.4th 1331, 1344, is inapposite because Vargas discussed the constitutionality of an attorney fees award in favor of government entity defendants. Although Vargas is tangentially related to the anti-SLAPP statute, it is not authority for determining the scope of activities which fall within its protection.

Accordingly, the burden shifts to Plaintiff to prove that she has a reasonable probability of prevailing on the merits of her malicious prosecution claims.

An action for malicious prosecution has three required elements: “(1) the defendant brought (or continued to pursue) a claim in the underlying action without objective probable cause, (2) the claim was pursued by the defendant with subjective malice, and (3) the underlying action was ultimately resolved in the plaintiff's favor.” (Lane v. Bell (2018) 20 Cal.App.5th 61, 67, 228 Cal.Rptr.3d 605.) The Court proceeds to discuss each element of a malicious prosecution claim in the context of the Federal Court Action and the Second State Court Action, respectively.

a. Whether Attorney Defendants Brought the Federal Court Action with Probable Cause

“An action is deemed to have been pursued without probable cause if it was not legally tenable when viewed in an objective manner as of the time the action was initiated or while it was being prosecuted.” (Sycamore Ridge Apartments LLC v. Naumann (2007) 157 Cal.App.4th 1385, 1402, 69 Cal.Rptr.3d 561.) The test is whether, on the basis of facts then known, any reasonable attorney would have believed that instituting or maintaining the prior action was tenable. (Ibid.; see Zamos v. Stroud (2004) 32 Cal.4th 958, 973 [continuing to pursue an action discovered to lack probable cause meets the standard].) “A litigant will lack probable cause for his action either if he relies upon facts which he has no reasonable cause to believe to be true, or if he seeks recovery upon a legal theory which is untenable under the facts known to him.” (Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 292.) The presence or lack of probable cause is “to be determined as a matter of law and by an objective standard.” (Copenbarger v. International Ins. Co. (1996) 46 Cal.App.4th 961, 964.)

Plaintiff argues that the Federal Court Action was brought without probable cause because two of the federal claims, which were brought under the Internal Revenue Code, did not allow for a private cause of action and thus, failed as a matter of law. Plaintiff argues that the third federal claim was factually deficient because the Asdourians alleged that Plaintiff received the tax returns from the Asdourians themselves, not the IRS.

On reply, Attorney Defendants merely argue that the determination of whether probable cause exists is a “lenient standard” with a “low threshold designed to protect a litigant’s right to assert arguable legal claims even if the claims are extremely unlikely to succeed.” (Reply, p. 6.) Attorney Defendant rely on Copenbarger, in which the Court of Appeal found probable cause for an indemnity cross-complaint because of a “conflict among the appellate judiciary, and in the absence of a resolution by the [California] Supreme Court.” (Copenbarger, supra, 46 Cal.App.4th at p. 966.) Copenbarger is inapposite because the appellate court noted that while existing cases “provide[d] analytical guidance”, “the factual context” before it was different. (Id. at p. 965.) The Copenbarger court also noted the dearth of case law at the time the cross-complaint was filed. (Id., p. 966.)

As stated above, the determination of probable cause is an objective one. Here, where the facts and statutory language plainly do not provide for an actionable claim, there cannot be a finding that probable cause existed. Although Attorney Defendants argue that Plaintiff fails to introduce any evidence that the District Court granted the motion to dismiss on legal grounds, Plaintiff attached a copy of the District Court’s order as Exhibit E to the Complaint. In this order, the District Court states:

“The Motion is GRANTED for failure to state a claim as to each of the three federal claims because Plaintiffs do not and cannot state a valid claim for relief under the Internal Revenue Code (“IRC”). Two of Plaintiff’s IRC claims are improperly premised on penal provisions that do not provide Plaintiffs with a private right of action. And the one claim premised on the civil enforcement provision of the IRC does not apply here because the Complaint affirmatively alleges that Defendant did not obtain the tax return information from the IRS.”

(Compl., Ex. E, Order p. 2.) In light of this unambiguous basis for dismissal, Plaintiff has shown a probability of prevailing on the element of probable cause in connection with the Federal Court Action.

Accordingly, Plaintiff shows that the Federal Court Action was brought without probable cause.

Malice is generally inferred from surrounding circumstances: “Suits with the hallmark of an improper purpose are those in which: ... (1) the person initiating them does not believe that his claim may be held valid; (2) the proceedings are begun primarily because of hostility or ill will…” (Sierra Club Foundation v. Graham (1999) 72 Cal.App.4th 1135, 1157.) The determination of malice is subjective and therefore, “the extent of a defendant attorney’s investigation and research may be relevant to the . . . question of whether or not the attorney acted with malice.” (Area 55, LLC v. Nicholas & Tomasevic, LLP (2021) 61 al.App.5th 136, 171.) “Malice is “usually proven by circumstantial evidence and inferences drawn from the evidence.” (Id., p. 170.) Malice may “also be inferred from the facts establishing lack of probable cause” as well as when a party “continues to prosecute an action after becoming aware that the action lacks probable cause.” (Ibid.)

Plaintiff contends that the timing of the Federal Court Action’s complaint, combined with its total lack of merit, gives rise to an inference of malice. Plaintiff argues that at the time the Federal Court Action was filed on November 10, 2022, Attorney Defendants knew, or should have known, that the Original State Court Action was scheduled for trial on December 19, 2022, pursuant to stipulation. Plaintiff contends that the Federal Court Action was filed in order to divert resources from the upcoming trial by requiring her to file a responsive pleading in federal court a week before trial was scheduled to begin. (Opp., p. 11.) Plaintiff’s counsel further declares that she informed Attorney Defendants of the factual and legal deficiencies in the Asdourians’ Federal Court Action in a meet and confer conducted on January 19, 2023, including the fact that the statutes underlying the Asdourians’ federal claims were inapplicable. (Young Decl., ¶¶ 8-9.) Therefore, a reasonable inference may be made that the Attorney Defendants acted with malice in continuing to prosecute the Federal Court Action.

On reply, Attorney Defendants argue that the timing of the Federal Court Action does not demonstrate malice because Plaintiff did not file her motion to dismiss until January 23, 2023, which demonstrates that she received an extension to file a responsive pleading. However, whether Plaintiff received an extension to reply to an arguably baseless action is not, as a matter of law, a defense to the element of malice, but simply presents a question of fact.

“In order for a termination of a lawsuit to be considered favorable with regard to a malicious prosecution claim, the termination must reflect on the merits of the action and the plaintiff's innocence of the misconduct alleged in the lawsuit.” (Lee v. Kim (2019) 41 Cal.App.5th 705, 720.) In Maleti v. Wickers (2022) 82 Cal.App.5th 181, 206, the court of appeal considered whether “favorable determination” required resolution of all claims on the merits. The Maleti court held that the element of “favorable termination” is satisfied where a prior defendant prevailed unequivocally on all claims in the lawsuit and “at least one claim was disposed of substantively in the defendant’s favor.” (Id. at p. 208.)

As stated above, the Federal Court Action was dismissed in its entirety when the Asdourians’ federal claims were dismissed with prejudice and the district court declined to exercise supplemental jurisdiction over the two remaining state claims. (Young Decl. ¶ 13, Exhibit C, Complaint, ¶ 76, Ex E, p. 2.) Defendant argues that the dismissal of the two state claims on “procedural” grounds is insufficient to show favorable termination, but this argument is directly contrary to the holding in Maleti. Therefore, Plaintiff makes a prima facie showing that she obtained a favorable termination with regard to the Federal Court Action.

a. Whether Attorney Defendants Brought the Second State Court Action with Probable Cause

Plaintiff argues that the Second State Court Action lacked probable cause because: (1) the claims premised on the disclosure of tax returns was barred by the litigation privilege, and (2) Plaintiff’s counsel sent two safe-harbor letters informing Attorney Defendants of the problems with their case. (Opp., pp. 12-14.) Plaintiff emphasizes that the Second State Court Action was dismissed once she filed an answer asserting the litigation privilege as an affirmative defense. Plaintiff also submits a declaration stating that during the Original State Court Action, she disseminated the Asdourians’ personal tax returns because it was relevant to their alleged misrepresentations about the profitability of their business, VTA.

“The usual formulation is that the [litigation] privilege applies to any communication (1) made in judicial or quasi-judicial proceedings; (2) by litigants or other participants authorized by law; (3) to achieve the objects of the litigation; and (4) that have some connection or logical relation to the action. [Citations.]” (Silberg v. Anderson (1990) 50 Cal.3d 205, 212.)

Attorney Defendants argue in their moving papers and reply brief that the litigation privilege did not apply to Plaintiff’s disclosure of the Asdourian’s personal tax returns. Attorney Defendants argue that the personal tax returns were not disclosed “to achieve the objects of the litigation” nor did they have “some connection or logical relation” to the Original State Court Action, which pertained to the Asset Purchase Agreement and did not depend on the Asdourians’ personal tax information. However, Plaintiff’s declaration is sufficient to demonstrate a prima facie showing that the Second State Court Action was brought without probable cause because the litigation privilege arguably could have applied.

Plaintiff argues that the Attorney Defendants acted with malice because the Second State Court Action was prosecuted for seven months despite their knowledge that it was meritless. Plaintiff points to multiple meet and confer letters and prospective motions for sanctions which were premised on the litigation privilege and outlined the impropriety of the Asdourians’ claims. Plaintiffs also point out that the Second State Court Action was filed only six weeks after the jury returned a verdict in the Original State Court Action in her favor and the jury had already rejected the Asdourians’ claims for damages relating to their personal tax returns. Additionally, Attorney Defendants remained counsel of record for an additional seven months after Plaintiff filed her motion to dismiss the Federal Court Action on January 23, 2024, which included the litigation privilege as the first argument.

Attorney Defendants argue that any ill will held by their clients, the Asdourians, cannot be properly imputed onto them simply due to the Attorney Defendants’ past use of the Asdourians’ tax services. Attorney Defendants also argue that any ill will stemming from the Original State Court Action cannot be imputed onto them because they were not involved in that case. Paronyan also submits a declaration stating that he determined the verdict in the Original State Court Action only concerned Plaintiff’s unauthorized access of tax returns, not their dissemination.

It is reasonable to infer that an attorney acts with an improper purpose when an action is filed on a claim which has already been litigated because it implies a lack of adequate research or investigation. At most, Attorney Defendants have raised conflicting inferences about whether they adequately investigated the claims underlying the Second State Action. Therefore, Plaintiff has shown a reasonable probability that she can establish the element of malice necessary for her malicious prosecution claim. The Attorney Defendants’ arguments merely create conflicting inferences, without showing that their eventual dismissal barred a malicious prosecution claim as a matter of law.

“A voluntary dismissal is presumed to be a favorable termination on the merits, unless otherwise proved to a jury.” (Sycamore Ridge Apartments v. Naumann (2007) 157 Cal.App.4th 1385, 1400–1401.) The Second State Court Action was voluntarily dismissed in December 2023. Therefore, Plaintiff argues that the voluntary dismissal resulted in a favorable termination.

In opposition, Attorney Defendants argue that the Second State Court Action was dismissed for economic and tactical reasons, and therefore did not constitute a voluntary dismissal because it was not premised on Plaintiff’s innocence. Attorney Defendants cite to JSJ Limited Partnership v. Mehrban (2012) 205 al.App.4^th 1512, which held that a voluntary dismissal following the sustention of a demurrer based on res judicata was not a favorable termination “on the merits.” Plaintiff notably does not address or attempt to distinguish JSJ and does not argue anything other than the fact that the action was dismissed because Attorney Defendants realized that the Second State Court Action was barred by res judicata. Accordingly, Plaintiff fails to show that the Second State Court Action was resolved in her favor on the merits as required to establish a malicious prosecution claim.

The motion to strike is DENIED as to Plaintiff’s First Cause of Action and GRANTED as to Plaintiff’s Second Cause of Action.

William A. Crowfoot

Judge of the Superior Court

Parties who intend to submit on this tentative must send an email to the Court at ALHDEPT3@lacourt.org indicating intention to submit on the tentative as directed by the instructions provided on the court website at www.lacourt.org. Please be advised that if you submit on the tentative and elect not to appear at the hearing, the opposing party may nevertheless appear at the hearing and argue the matter. Unless you receive a submission from all other parties in the matter, you should assume that others might appear at the hearing to argue. If the Court does not receive emails from the parties indicating submission on this tentative ruling and there are no appearances at the hearing, the Court may, at its discretion, adopt the tentative as the final order or place the motion off calendar.