Tuesday, December 20, 2005
Appeals Court Allows Suit Against Law Firm Over Threat to Sue
By KENNETH OFGANG, Staff Writer/Appellate Courts
A law firm’s threat to sue a retailer for selling an illegal product may be the subject of a suit by the product’s manufacturer for intentional interference with its business relationship with the retailer, the Fourth District Court of Appeal has ruled.
Div. Two Friday overturned a summary judgment in favor of the Moreno Valley firm of Geller, Stewart and Foley in a suit by American Products Co., Inc, a manufacturer of after-market automotive accessories, including specialty lights.
Riverside Superior Court Judge Gary Tranbarger had ruled that the action was barred by the absolute litigation privilege of Civil Code Sec. 47(b). But the Court of Appeal ruled that the privilege does not bar a suit by a plaintiff that was not a target of the litigation or threatened litigation on which the claim of privilege is based.
Threats to Sue
American Products claims the Geller firm interfered with its relationships with Pep Boys and Kragen Auto Parts by threatening to sue those firms for selling lighting kits made by American Products. In letters to those retailers, the Geller firm threatened—on behalf of client Michael D. Freeman—to sue if the companies would not settle claims that they engaged in unfair business practices by selling the lights without telling purchasers that the lights cannot be used on private vehicles on California highways.
To settle, the letters proposed, the companies would have to pay $2,500 to Freeman and $10,000 to the law firm, stop selling the products, and post notice in their stores offering to make refunds to all purchasers of the lights.
Freeman, an ex-lawyer who resigned from the State Bar in 1997 after being convicted of bankruptcy fraud, was working for the Geller firm as a paralegal when he purchased lights from the two stores in 2002.
Freeman, represented by the Geller firm, sued both Pep Boys and Kragen, who in turn notified American Products that it would not longer sell its accessories and would be returning the products it had in stock.
American Products then sued the Geller firm for tortious interference with its relationships with Pep Boys and Kragen. During discovery, it was disclosed that Freeman or Michael Geller, a partner in the law firm, had filed at least two dozen similar lawsuits.
Freeman admitted that at the time he purchased the products, he suspected that their use was illegal, but wanted to confirm that fact. It was also discovered that Richard Stewart, a partner in the Geller firm, was a Riverside County reserve deputy sheriff and had cited motorists for using the same products that were the subject of the lawsuits against the retailers.
In granting summary judgment, Tranbarger reasoned that because the letters contemplated a judicial proceeding, and since “intent, motive, morals or ethics” are irrelevant to the application of the litigation privilege, the suit was absolutely barred.
But Justice Thomas Hollenhorst, writing for the Court of Appeal, agreed with the manufacturer that as a third party, it was not precluded from suing.
“[W]hile the litigation privilege will extend to an unfair competition claim against an attorney where the claim is founded on the attorney’s misconduct in earlier litigation against the plaintiff, such is not the case where the plaintiff was not a party to the earlier litigation,” the justice wrote. “...Here, APC was not a party to any of the litigation that underlies its unfair competition claim against the Geller defendants. Nor is the unfair business practices litigation the subject of APC’s other causes of action for interference with a contractual relationship and intentional interference with prospective economic advantage.”
The case is American Products Co., Inc. v. Law Offices of Geller, Stewart & Foley, LLP, 05 S.O.S. 5602.
Copyright 2005, Metropolitan News Company