Monday, June 22, 2009
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C.A. Reverses $1 Million Award Against Landlord
By SHERRI M. OKAMOTO, Staff Writer
This district’s Court of Appeal Friday reversed an award of over $1 million in favor of a Los Angeles attorney against his Santa Monica landlord for alleged rent control ordinance violations.
Div. One ruled that Robert Bisno’s wrongful eviction and unlawful rent demand claims were barred by the litigation privilege to the extent they were based on an unlawful detainer action and on a three-day notice to quit that was a prerequisite to that action. The panel also affirmed Los Angeles Superior Court Judge Phrasel L. Shelton’s pretrial order summarily adjudicating the affirmative defense of reliance on advice of counsel barred Bisno’s malicious prosecution cause of action.
Bisno began renting an apartment at The Shores in Santa Monica, a luxury high-rise apartment complex adjacent to the beach, at a monthly rate of $933 in 1996.
Although Bisno was married at that time, his wife was not named on the lease and he was the sole signatory and designated tenant. Both he and his wife resided in Berkeley, but they would occasionally stay at the unit while in Los Angeles.
The lease provided that no one but Bisno could occupy the unit without obtaining the owner’s consent and prohibited Bisno from assigning or subletting the apartment. It specified that the monthly rent would increase to $2,000 should Bisno assign or sublet the unit, whether with or without the owner’s consent. The Douglas Emmett Realty Fund purchased the building in 1998 and designated Douglas, Emmett & Company to serve as the property’s manager.
After Bisno’s wife filed for divorce in 2001, Bisno moved into the apartment and remained there while construction was being completed on the property he and his wife had purchased Beverly Hills.
Bisno later moved into the Beverly Hills home and submitted a request to the landlord that his wife be made a tenant on the lease as she was planning to make the apartment her primary residence.
In March 2003, Douglas Emmett, represented by Don C. Sherwood of the Law Offices of Sherwood and Hardgrove, served Bisno with a notice of intent to file a petition seeking to raise the monthly rent from the then-current rent-controlled rate of around $1,000 to the market rate of more than $4,000 in accordance with the Santa Monica Rent Control Charter Amendment.
A hearing officer of the Santa Monica Rent Control Board later approved the petition and that decision was upheld on appeal.
Costa-Hawkins Act
Sherwood subsequently advised Douglas Emmett that a rent increase might also be authorized pursuant to the Costa-Hawkins Rental Housing Act as Bisno’s wife would be a sublessee under the act, and another notice of rent increase was sent to Bisno demanding a monthly rent of $4,295.
He also recommended that an attorney with experience with the act be hired to confirm the legal basis for the rent increase and handle the unlawful detainer action, should one become necessary. Douglas Emmett then retained Santa Monica attorney Craig Mordoh, an unlawful detainer specialist.
Mordoh reviewed the lease and board hearing officer’s report and advised Douglas Emmett that it had a valid Costa-Hawkins claim.
Bisno refused to pay the increased rent, and Mordoh prepared and served a three-day notice to quit, then an unlawful detainer action. Bisno’s attorney responded by noting several perceived flaws in the unlawful detainer action.
Upon reviewing the lease again and noting the language limiting the rent increase to $2,000 per month in the event the unit were subleased, Mordoh advised Douglas Emmett that a Costa-Hawkins rent increase in that reduced amount would likely be valid, but recommended that Emmett dismiss the unlawful detainer action against Bisno.
Douglas Emmett did so and Bisno filed suit for malicious prosecution, alleging that the unlawful detainer action was part of a campaign of harassment designed to drive him out of his apartment. His complaint also included causes of action for wrongful eviction and improper demands for unwarranted and excessive rent.
The trial court granted Douglas Emmett’s motion for summary adjudication of the malicious prosecution claim, finding that the landlord had established as a matter of law the affirmative defense of good faith reliance on the advice of counsel, but it denied the motion for leave to amend its answer to assert the litigation privilege as an affirmative defense to the remaining causes of action.
A jury found in Bisno’s favor on both claims and further found Douglas Emmett had acted maliciously and in bad faith. After various post-trial motions, Bisno was awarded damages of $125,616, punitive damages of $311,420, over $19,000 in costs and over $700,000 in attorney fees.
Both Parties Appeal
Douglas Emmett appealed the jury’s verdict and Bisno appealed the pretrial summary adjudication on his malicious prosecution claim. Bisno contended that the Douglas Emmett’s awareness of the $2,000 limit in the lease and purported failure to provide Mordoh with the tenant file created a triable issue of fact concerning whether the landlord had fulfilled its duty to make full disclosure to counsel for purposes of the advice-of-counsel defense.
Writing for the appellate court, Justice Laurence D. Rubin of Div. Eight, sitting on assignment, explained that a client who has provided a copy of a contract to counsel while seeking legal advice about his rights under the contract is not obligated to point out any particular provision or a legal theory to the lawyer as a prerequisite to an advice-of-counsel defense to a malicious prosecution action.
And as Sherwood and Mordoh both reviewed copies of the lease and hearing officer’s report, they were apprised of all the relevant facts and had access to the information that Bisno contended the landlord had failed to disclose, Rubin added.
Litigation Privilege
Turning to Bisno’s rent control causes of action, Rubin explained that the trial court erred in concluding that the litigation privilege did not apply as a matter of law in light of Action Apartment Association, Inc. v. City of Santa Monica (2007) 41 Cal.4th 1232, and had abused its discretion in denying Douglas Emmett’s motion for leave to amend its answer as the trial court did not find the motion untimely and Bisno had not shown that he would have been prejudiced had the motion been granted.
Action Apartment provides that the litigation privilege may preempt local rent control ordinances regulating bad faith eviction notices or other pre-litigation conduct if such pre-litigation communication related to litigation contemplated in good faith and under serious consideration.
Rubin noted that the focus of such an inquiry is “on whether the unlawful detainer action was seriously contemplated when the notice was served, without regard to its merits or the landlord’s motive.”
Because the three-day eviction notice sent to Bisno was quickly followed by the unlawful detainer action, Rubin reasoned that no reasonable jury could have concluded that such litigation was not being contemplated and so the litigation privilege applied to Bisno’s wrongful eviction claim.
‘Breaking Point’
The justice noted that “[t]heoretically any demand for increased rent could be viewed as a step toward litigation, because it is possible a tenant might refuse to comply, leading the landlord to sue,” but applying the litigation privilege to every demand “would stretch the privilege to its breaking point.”
As Bisno’s unlawful rent demand claim based on the 60-day notice for increased rent under the Costa-Hawkins Act was more attenuated from the ultimate unlawful detainer action than was the penultimate three-day notice to quit, Rubin, joined by Presiding Justice Robert M. Mallano and Justice Frances Rothschild, ordered that the factual issue of whether litigation was contemplated in good faith and under serious consideration at the time the notice was sent be remanded for determination through trial or by an appropriate form of pretrial disposition.
Lawrence H. Nagler and David F. Berry of Nagler & Associates represented Bisno. Roy G. Weatherup and Caroline E. Chan of Lewis Brisbois Bisgaard & Smith and John W. Sheller and Filomena E. Meyer of Hinshaw & Culbertson joined Sherwood in represented Douglas Emmett.
The case is Bisno v. Douglas Emmett Realty Fund 1988, 09 S.O.S. 3789.
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