Katelin Danaher v. Isla Vista Owner LLC, et al

Case Number

22CV03017

Case Type

Hearing Date / Time

Wed, 02/07/2024 - 10:00

Nature of Proceedings

Motion For Order Permitting Discovery of Defendant’s Financial Condition

Tentative Ruling

For Plaintiff Katelin Danaher: Kevin McCormick, Benjamin L. Baumer,

Lowthorp, Richards, LLP

For Defendant Isla Vista Owner, LLC: Jeffrey M. Lenkov, Joseph Escarez, Calvin J. Park, Manning & Kass, Ellrod, Ramirez, Trester LLP

For Defendants Fauver, Large, Archbald & Spray LLP, Trevor D. Large, and Christopher De La Vega: Michael B. Wilk, David D. Samani, Lewis Brisbois Bisgaard & Smith LLP

RULING

1. For all reasons discussed herein:
2. The motion of Plaintiff for an order permitting discovery of Defendant Isla Vista Owner, LLC’s, financial condition, is denied.
3. But the Court has been here many times in the past 26 years.
4. The Court alerts the Defendants; if the jury comes back with a finding that Plaintiff is entitled to punitive damages, the Court conducts a case management conference immediately after the jury verdict; we are talking minutes not hours; and the Defendants will have their “financial reports clearly and legibly ready” for presentation to the jury who will “come back” the following day, after the initial verdict, to hear testimony related to punitive damages.

5. The Court will levy substantial sanctions if it finds the financial information lacking.

Background

Plaintiff Katelin Danaher filed a complaint in this matter on August 4, 2022, alleging a sole cause of action for malicious prosecution against Defendants Isla Vista Owner, LLC (Owner), Fauver, Large, Archbald & Spray LLP (the Fauver firm), Trevor Large (Large), and Christopher De La Vega (De La Vega) (collectively, the Fauver Defendants). As alleged in the complaint:

Large is the managing partner of the Fauver firm and De La Vega is an associate attorney. Owner is Plaintiff’s former landlord. Plaintiff is a former tenant of Owner and a student at UCSB.

On December 24, 2020, Owner filed as case number 20CV04332, a complaint alleging a cause of action for defamation against Plaintiff (the Defamation Action). The Defamation Action arose out of comments made to the local press by Plaintiff after Plaintiff prevailed in a small claims action that Plaintiff filed against Owner.

Prior to the filing of the Defamation Action, Plaintiff had reported unsafe rental unit conditions to the County of Santa Barbara. After Plaintiff prevailed on her lawsuit against Owner, she was interviewed by a newspaper reporter who then published an article regarding Plaintiff’s experiences with residing at the Owner’s unit. The Fauver Defendants advised and represented Owner in the Defamation Action.

Plaintiff responded to the Defamation Action by filing a special motion to strike (the anti-SLAPP motion). In its Minute Order dated May 11, 2021 (the Minute Order). (See Compl., Exh. A.) The Court also awarded attorneys’ fees and costs to Plaintiff.

After the Court issued its Minute Order in the Defamation Action, judgment was entered in Plaintiff’s favor and was not thereafter appealed. In the present action, Plaintiff contends that, based on the Court’s findings as set forth in the Minute Order, the Defamation Action lacked probable cause and was filed with malicious intent.

Owner filed an answer to Plaintiff’s present complaint on October 27, 2022, generally denying its allegations and asserting twenty-one affirmative defenses.

On November 9, 2022, the Fauver Defendants filed an answer to the complaint generally denying its allegations and asserting sixteen affirmative defenses.

On September 21, 2023, Owner filed an amended answer to the complaint.

Plaintiff has filed a motion for an order authorizing discovery of the financial condition of Owner. In the motion, Plaintiff contends that there exists a substantial probability Plaintiff will prevail on her punitive damage claim based on what Plaintiff asserts constitutes clear and convincing evidence establishing that Owner maliciously prosecuted the Defamation Action against Plaintiff in retaliation for Plaintiff blowing the whistle on unsafe and illegal rental practices.

Owner has not filed an opposition to Plaintiff’s motion.

Analysis

Though a Plaintiff must present evidence of a Defendant’s financial condition and ability to pay any award of punitive damages to enable a jury to ascertain whether the award “is properly calibrated so as to inflict economic pain without financially ruining the Defendant”, a Plaintiff may not seek pretrial discovery of a Defendant’s financial condition “unless the Court enters an order permitting such discovery pursuant to [Code of Civil Procedure section 3295, subdivision (c)….” (Soto v. BorgWarner Morse TEC Inc. (2015) 239 Cal.App.4th 165, 192; Civ. Code, § 3295, subds. (a)(1)(2) & (c).) (Note: Undesignated statutory references are to the Code of Civil Procedure unless otherwise stated.)

To obtain an order permitting discovery of a Defendant’s financial condition or profits under section 3295, subdivision (c), a Plaintiff must file a motion that is “supported by appropriate affidavits[.]” (Civ. Code, § 3295, subd. (c).) Upon an appropriate motion and “after a hearing, if the Court deems a hearing to be necessary, the Court may at any time enter an order permitting the discovery otherwise prohibited by this subdivision if the Court finds, on the basis of the supporting and opposing affidavits presented, that the Plaintiff has established that there is a substantial probability that the Plaintiff will prevail on the claim pursuant to Section 3294.” (Ibid.)

Section 3295, subdivision (c), was enacted “to protect Defendants from being subjected to pretrial discovery into their financial affairs until a Plaintiff establishes the likelihood he will prevail on his punitive damages claim.” (Jabro v. Superior Court (2002) 95 Cal.App.4th 754, 757, 759 [also noting that the statute protects Defendants from “being forced to settle unmeritorious lawsuits”].) In order to find a “substantial probability” of prevailing on a claim for punitive damages, the Court must “(1) weigh the evidence submitted in favor of and in opposition to motion for discovery, and (2) make a finding that it is very likely the Plaintiff will prevail on his claim for punitive damages.” (Id. at p. 758 [also interpreting the terms “substantial probability” to mean “ ‘very likely’ or ‘a strong likelihood’ just as their plain meaning suggests”]; see also Kerner v. Superior Court (2012) 206 Cal.App.4th 84, 120.)

To be entitled to an award of punitive damages, a Plaintiff must prove, by “clear and convincing evidence that the Defendant has been guilty of oppression, fraud, or malice[.]” (Civ. Code, § 3294, subd. (a).)

Under section 3294, “malice” means “conduct which is intended by the Defendant to cause injury to the Plaintiff or despicable conduct which is carried on by the Defendant with a willful and conscious disregard of the rights or safety of others.” (Civ. Code, § 3294, subd. (c)(1).) “Oppression” means “despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights.” (Civ. Code, § 3294, subd. (c)(2).) While the term “despicable” is not defined in Civil Code section 3294, subdivision (c), the term includes “circumstances that are ‘base,’ ‘vile,’ or ‘contemptible.’ [Citation.]” (College Hospital Inc. v. Superior Court (1994) 8 Cal.4th 704, 725.) “Fraud” means an intentional misrepresentation, deceit, or concealment of a material fact known to the Defendant with the intention on the part of the Defendant of thereby depriving a person of property or legal rights or otherwise causing injury. (Civ. Code, § 3294, subd. (c)(3).)

Plaintiff contends that the doctrine of res judicata bars Owner from asserting in this action that there existed probable cause to bring the Defamation Action because, according to Plaintiff, the Court previously determined that the Defamation Action lacked merit and was filed for a retaliatory purpose. Therefore, Plaintiff argues, she has established that the Defamation Action lacked probable cause and was maliciously prosecuted.

The term “[r]es judicata … is an umbrella term encompassing issue preclusion and claim preclusion, both of which describe the preclusive effect of a final judgment.” (Guerrero v. Department of Corrections & Rehabilitation (2018) 28 Cal.App.5th 1091, 1098.) Claim preclusion, the primary aspect of res judicata, prevents a party from relitigating the same cause of action in a second suit between the same parties while issue preclusion prevents the relitigation of issues actually litigated and resolved in the prior proceeding. (Mycogen Corp. v. Monsanto Co. (2002) 28 Cal.4th 888, 896; Boeken v. Philip Morris USA, Inc. (2010) 48 Cal.4th 788, 797.)

Claim preclusion bars relitigation of the same cause of action in a second suit between the same parties when the “second suit involves: (1) the same cause of action (2) between the same parties (3) after a final judgment on the merits in the first suit.” (DKN Holdings LLC v. Faerber (2015) 61 Cal.4th 813, 824.) Because the present action for malicious prosecution and the Defamation Action do not involve the same causes of action, claim preclusion does not apply here.

Plaintiff also effectively asserts that, because the Court commented in the Minute Order that the Defamation Action was brought for a retaliatory purpose, Plaintiff has litigated the issue of malice in a manner sufficient to support a claim for punitive damages in the present action.

To resolve the anti-SLAPP motion, the Court was required to determine whether Owner met its burden to show that the claim asserted in the Defamation Action was “legally sufficient and factually substantiated.” (Baral v. Schnitt (2016) 1 Cal.5th 376, 396; see also Minute Order.) In making this determination, the Court did not weigh the credibility of the competing evidence submitted by Owner and Plaintiff. (See Zamos v. Stroud (2004) 32 Cal.4th 958, 965 [also noting that the Plaintiff must submit evidentiary support sufficient to support a judgment in Plaintiff’s favor].)

As noted in the Minute Order, “[i]n a defamation action, ‘ “the dispositive question for the Court is whether a reasonable fact finder could conclude that the published statements imply a provably false factual assertion.” ’ ” (Minute Order, citing Rosenaur v. Scherer (2001) 88 Cal.App.4th 260, 280.) The Court further explained that it applies a “ ‘ “a totality of the circumstances test pursuant to which [the Court] consider[s] both the language of the statement itself and the context in which it is made.” ’ ” (Ibid., citing Summit Bank v. Rogers (2012) 206 Cal.App.4th 669, 696.)

In making its determination, it was not necessary for the Court to determine whether the Defamation Action was filed by Owner for a retaliatory purpose or with malice. Therefore, the Court’s sole stray comment regarding a retaliatory intent was not necessary to the Court’s decision and not relevant to the material facts offered by the parties in support of and in opposition to the anti-SLAPP motion. For this reason, the Court’s comment has no issue preclusive effect.

In addition, “[b]y definition, a malicious prosecution suit alleges that the Defendant committed a tort by filing a lawsuit.” (Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 735.) “To prevail on a malicious prosecution claim, the Plaintiff must show that the prior action (1) was commenced by or at the direction of the Defendant and was pursued to a legal termination favorable to the Plaintiff; (2) was brought without probable cause; and (3) was initiated with malice.” (Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 292.)

The element of probable cause in the tort of malicious prosecution “plays a role quite distinct from the separate ‘malice’ element of the tort. Whereas the malice element is directly concerned with the subjective mental state of the Defendant in instituting the prior action, the probable cause element calls on the trial Court to make an objective determination of the ‘reasonableness’ of the Defendant’s conduct, i.e., to determine whether, on the basis of the facts known to the Defendant, the institution of the prior action was legally tenable.” (Sheldon Appel Co. v. Albert & Oliker (1989) 47 Cal.3d 863, 878, original italics.) There exists probable cause if at the time the claim was filed “any reasonable attorney would have thought the claim tenable….” (Id. at p. 886.) However, obtaining a judgment “for the defense on the underlying claim does not necessarily establish the malice element of a subsequent malicious prosecution claim.” (Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 742-743.)

For reasons discussed above, notwithstanding that judgment was entered in the Defamation Action in favor of Plaintiff, this does not necessarily establish that Owner initiated the action with malice. Moreover, even if the Court were to determine that the findings set forth in the Minute Order also establish that the Defamation Action was brought without probable cause (and the Court presently makes no findings in this regard), such finding would also be insufficient to establish that the Defamation Action was initiated with malice.

In addition, “just as an action that ultimately proves nonmeritorious may have been brought with probable cause, successfully defending a lawsuit does not establish that the suit was brought without probable cause.” (Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 743.) For this additional reason, though Plaintiff prevailed in her anti-SLAPP motion, this does not establish, for present purposes, that the issue of probable cause was raised, litigated, and resolved in the Court’s Minute Order. Plaintiff’s successful defense is also not dispositive of whether the Defamation Action was brought with probable cause. (See Navellier v. Sletten (2002) 29 Cal.4th 82, 94 [a Plaintiff need only demonstrate “minimal merit” to survive an anti-SLAPP motion].)

 

“The ‘malice’ element of the malicious prosecution tort relates to the subjective intent or purpose with which the Defendant acted in initiating the prior action, and past cases establish that the Defendant’s motivation is a question of fact to be determined by the jury.” (Sheldon Appel Co. v. Albert & Oliker (1989) 47 Cal.3d 863, 874.) The Court was not required to and did not consider Owner’s subjective mental state in instituting the Defamation Action when making its determination regarding the merits of the anti-SLAPP motion or the Defamation Action. For this additional reason, the Court’s stray comment regarding whether the Defamation Action was filed with retaliatory intent has no issue preclusive effect.

Plaintiff submits evidence which was also presented in the Defamation Action. Plaintiff argues that this evidence establishes Owner’s malice and retaliatory intent. The evidence offered by Plaintiff relates to Owner’s marketing and rental practices with respect to the living area Plaintiff rented from Owner, Owner’s allegations in the Defamation Action regarding whether living areas such as the space rented by Plaintiff were offered for habitation, Owner’s claim that it did not use students to market its rental properties or lease illegal spaces for habitation, the issuance of a “red-tag” notice by the County of Santa Barbara regarding Owner’s rental properties, and information provided by Owner to its attorneys in connection with the Defamation Action.

“Malice does not require actual intent to harm. [Citation.]” (Angie M. v. Superior Court (1995) 37 Cal.App.4th 1217, 1228 (Angie M.).) Rather, “conscious disregard” requires “that the Defendant have actual knowledge of the risk of harm it is creating and, in the face of that knowledge, fail[ed] to take steps it knows will reduce or eliminate the risk of harm.” (Ehrhardt v. Brunswick, Inc. (1986) 186 Cal.App.3d 734, 742, original italics; accord, Butte Fire Cases (2018) 24 Cal.App.5th 1150, 1159. Therefore, “[c]onscious disregard for the safety of another may be sufficient where the Defendant is aware of the probable dangerous consequences of his or her conduct and he or she willfully fails to avoid such consequences.” (Angie M., supra, 37 Cal.App.4th at p. 1228; accord, Pfeifer, supra, 220 Cal.App.4th at p. 1299.) Further, “[m]alice may be proved either expressly through direct evidence or by implication through indirect evidence from which the jury draws inferences.” (Ibid.)

The Legislature added the element of “despicable conduct” to the statutory definitions of malice [related to one of the two alternate means of showing “malice” under section 3294(c)(1)] and oppression, for the purpose of providing greater assurance that punitive damages will be awarded only to punish conduct that is truly blameworthy and reprehensible. (Mock v. Michigan Millers Mut. Ins. Co. (1992) 4 Cal.App.4th 306, 331.) It has been defined to mean conduct “which is so vile, base, contemptible, miserable, wretched or loathsome that it would be looked down upon and despised by ordinary decent people.” (Ibid.)

The evidence offered by Plaintiff does not necessarily support Plaintiff’s conclusory and speculative assertions regarding whether Owner filed the defamation action with a malicious intent. (See Brousseau v. Jarrett (1977) 73 Cal.App.3d 864, 872 [conclusory assertions are insufficient to satisfy the requirements of Civil Code section 3294].) Furthermore, Plaintiff’s own evidence gives rise to competing inferences regarding whether Owner filed the Defamatory Action for a retaliatory purpose or with malice.

For example, the evidence demonstrates that Owner’s stated intent for filing the Defamation Action was to correct statements made to the local press by Plaintiff that Owner alleged were slanderous, to obtain legal remedies for harm to Owner’s business operations, and to prevent Plaintiff from further slandering Owner and Owner’s business operations. (Pl. Exh E at p. 46, ll. 20-25, p. 47, ll. 1-17, p. 49, l. 20 – p. 50, l. 25.]

The evidence and information offered by Plaintiff also gives rise to competing inferences regarding whether Owner legitimately believed that Plaintiff’s statements were slanderous. (See Pl. Exh. F at ¶¶ 16-22, 26, 32-37; Exh. at ¶ 29.) The Court also notes that, in its Minute Order, the Court found that “the contents of the article were a material factor in [Owner’s] lawsuit[.]” (Minute Order [Synopsis].) The examples provided herein are not intended to be exhaustive.

The information and evidence offered by Plaintiff, including information provided by Owner to the Fauver Defendants, does not necessarily demonstrate or suggest that Owner’s stated intent for filing the Defamation Action was untruthful nor has the Court made any findings regarding this issue. Plaintiff’s successful defense of the Defamation Action on anti-SLAPP grounds does not require the Court to find for present purposes that Plaintiff has also established fraud, oppression, or malice sufficient to sustain an award of punitive damages.

The Court has reviewed the evidence presented by Plaintiff which, for reasons further discussed above, gives rise to competing inferences regarding whether Owner filed the Defamatory Action for a retaliatory purpose or with malice. Based on these competing inferences, the Court is unable to find it very likely that Plaintiff will prevail on her claim for punitive damages, notwithstanding whether there exists probable cause for bringing the Defamation Action. As the evidence is insufficient for present purposes to enable the Court to find that there exists a substantial probability that Plaintiff will prevail on her claim for punitive damages, the Court will deny the motion, without prejudice.

The Court has been here many times in the past 26 years. The Court has experienced, on occasion, that the financial information has been leaked or otherwise used inappropriately; the Court has established what it believes to be a better way to monitor the matter. The Court alerts the Defendants; if the jury comes back with a finding that Plaintiff is entitled to punitive damages, the Court conducts a case management conference immediately after the jury verdict; we are talking minutes not hours; and the Defendants will have their “financial reports clearly and legibly ready” for presentation to the jury who will “come back” the following day after the initial verdict to hear testimony related to punitive damages. The Court will levy sanctions if it finds the financial information lacking.