Thursday, November 29, 2012
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Developer May Proceed With Suit Against Local Attorneys—C.A.
Div. Five Finds Evidence of Malicious Prosecution Sufficient to Survive Anti-SLAPP Motion
By JACKIE FUCHS , Staff Writer
A Koreatown developer may proceed with its malicious prosecution suit against two local lawyers, this district’s Court of Appeal held yesterday.
Div. Five, in an unpublished opinion by Justice Richard Mosk, said Hanil Development, Inc. made a sufficient showing on the merits to survive an anti-SLAPP motion. The panel reversed Los Angeles Superior Court Judge Maureen Duffy-Lewis dismissal of the suit.
The developer alleges that attorneys Patrick Evans and David Kim prosecuted claims against it without probable cause and despite the fact that no reasonable attorney would have believed such claims were legally tenable.
The allegations arise out of litigation between Hanil and some of its shareholders concerning ownership of the company and its purported mismanagement of the construction of a Koreatown sports and entertainment complex known as the “Aroma Center.”
In that initial litigation, former shareholders Edward and Helen Ahn alleged, among other things, that the acquisition of a 75 percent ownership interest in the company by Hanil Engineering & Construction Company, Ltd. and Hanil Cement Company, Ltd. in 2000 had been fraudulently obtained. The Ahns claimed Edward Ahn’s purported signature on the subscription letter that transferred majority ownership of the company was a forgery, and that Hanil Development had breached its fiduciary duty to them as minority shareholders.
The two sets of claims were bifurcated, and after a 30-day trial on the ownership issue, Judge Marvin Lager rejected Edward Ahn’s assertion that his signature was a forgery and sanctioned him for refusing to admit that he signed the subscription letter.
Second Phase
In the second phase of the trial, Judge Joseph Kalin dismissed the claim for breach of fiduciary duty, finding, among other things, that the evidence showed that there had been “a substantial lack of discovery as to financial documents and an inadequate number of depositions taken of knowledgeable persons as to the facts of this case.”
Kalin noted that “[a] substantial amount of time spent in the [t]rial was dedicated to Ahn obtaining discovery from the witness stand from witnesses called to testify.”
The judge also noted that after nearly seven years of litigation it was clear “that the trial was being used as a discovery device for further litigation.”
In October 2010, Hanil Engineering & Construction and Hanil Cement filed a malicious prosecution action against the Ahns and their attorneys, who, in turn, filed special motions to strike the complaint under the anti-SLAPP statute.
The court applied the customary two-pronged analysis for anti-SLAPP motions. The first prong – that the cause of action arose from a protected activity – was a non-issue, as the parties agreed that the malicious prosecution action satisfied that prong..
That left the court to determine whether the plaintiffs had carried their burden on the second prong — showing a probability of success on the merits of their malicious prosecution claims —and, if so, whether defendants’ evidence in support of the anti-SLAPP motions defeated the plaintiffs’ prima facie showing as a matter of law.
Burden Met
The panel found that even though malicious prosecution is a disfavored action, the plaintiffs had met their burden. It held that Lager’s factual findings and sanctions order supported a reasonable inference that the Ahns’ claims concerning the ownership issue lacked a credible factual basis.
Writing for the panel, Mosk said:
“[i]t is reasonably arguable that no reasonable attorney with knowledge of those findings would have concluded that further litigation of the ownership issue was legally tenable… Therefore, the evidence in opposition to the anti-SLAPP motions was sufficient to show that [the plaintiffs] had set forth a prima facie case on the claim that the Ahns and their attorneys lacked probable cause to continue to litigate the ownership issue from and after Judge Lager’s ruling.”
In addition to making a prima facie showing on the probable cause element, the plaintiffs were required to show that the defendants acted with malice, that is, ill-will or improper motive showing a lack of probable cause.
The panel ruled that Lager’s determination that Edward Ahn’s testimony on the signature issue was untrue, coupled with the Ahns and their attorneys continuing to litigate the ownership issue after those findings, supported a reasonable inference that the Ahns and their attorneys were prosecuting what they knew or should have know was a factually baseless ownership claim in an effort to obtain a settlement unrelated to the merits.
Moreover, the panel said, Kalin’s findings concerning a lack of adequate investigation in connection with the breach of fiduciary duty claim also suggested malice.
‘Factual Issue’
Although the panel did not make a determination as to who should prevail on the merits of the malicious prosecution action, they held that “because malice is a factual issue, defendants’ evidence and arguments based thereon raise, at best, factual disputes that cannot be resolved on the motions to strike.”
Accordingly, the evidence in opposition to the defendants’ anti-SLAPP motion was sufficient to demonstrate a prima facie showing on the plaintiffs’ claims and the malicious prosecution suit should not have been dismissed.
Presiding Justice Paul Turner and Justice Sandy Kriegler concurred in the opinion.
David B. Parker, William K. Mills, and Justin D. Denlinger Parker of Shumaker Mills represented the plaintiffs. Evans represented the Ahns, while James J. Kjar, Cindy A. Shapiro, and Evan N. Okamura of Reback, McAndrews, Kjar, Warford & Stockalper represented Evans.
Kane Moon and Seung Yang of Moon and Yang represented Kim.
The case is Hanil Engineering & Construction Company v. Ahn; B232200.
Copyright 2012, Metropolitan News Company