Monday, March 2, 2009
Court Rejects Claim that Settlement Offer Was Ethics Violation
By STEVEN M. ELLIS, Staff Writer
This district’s Court of Appeal Friday upheld Century City law firm Troy & Gould’s anti-SLAPP challenge to claims it unethically conveyed a settlement offer to one of multiple co-defendants represented by the same counsel in order to raise a conflict of interest.
Holding attorneys’ communications of such offers to opposing counsel a protected activity subject to an absolute litigation privilege, regardless of propriety, Div. Eight affirmed a ruling striking the other defendants’ complaint for intentional interference with contractual relations.
Biotechnology company GeneThera Inc. filed suit against the firm after one of its employees, attorney Jeffrey Rosenfeld, extended the settlement offer while representing investors who had sued alleging the company’s actions rendered their $1.1 million investment “virtually worthless.”
When a co-defendant failed to appear for a deposition, Rosenfeld—now with Bingham McCutchen’s Santa Monica office—offered to settle for a nominal sum if she testified, and sent the offer by letter to defendants’ counsel, Long Beach attorney Mark Shoemaker.
Rosenfeld explained that his clients believed the woman’s testimony would be “useful” in the underlying action, but recognized the offer “emphasizes the conflict of interest” between Shoemaker and the woman, and encouraged her to consult with independent counsel.
Claiming the offer was designed to raise a conflict so Shoemaker could not represent any party and a violation of the Rules of Professional Conduct, Shoemaker and GeneThera each sued Troy & Gould and Rosenfeld for contractual interference and negligence.
They claimed the firm and Rosenfeld had a general duty to act in accordance with the rules, and alleged that the conduct by Troy & Gould and Rosenfeld was “unethical,” a “bad faith trial tactic,” and “contrary to the public policy stated in Rule 1-100 to protect the public and to promote respect and confidence in the legal profession.”
However, Troy & Gould and Rosenfeld moved to strike the complaints as strategic lawsuits against public participation, and Los Angeles Superior Court Judge Kevin C. Brazile granted the motion, expressly finding that the complaint arose from a protected activity and that Shoemaker and GeneThera failed to show a reasonable probability of success on the merits.
GeneThera appealed, but Justice Madeleine Flier—noting that the court had rejected Shoemaker’s appeal raising an “identical issue” in an unpublished opinion in December—wrote that Brazile’s ruling was correct.
Explaining that GeneThera’s causes of action were based on communication of an offer to settle an ongoing lawsuit, a matter connected with issues under consideration or review by a judicial body, Flier opined that the causes arose out of a protected activity because communication with opposing counsel on behalf of a client regarding pending litigation “directly implicates the right to petition.”
The justice then said that GeneThera could not demonstrate a probability of prevailing on its claims because Troy & Gould and Rosenfeld’s conduct was subject to an absolute litigation privilege.
Rejecting GeneThera’s argument that the communication in question must also have a “functional connection” as a “necessary or useful step” in the litigation process to qualify as protected, and concluding that neither Troy & Gould nor Rosenfeld violated the Rules of Professional Conduct, she wrote:
“A settlement letter directed to counsel falls within the category of communications to which the privilege attaches regardless of appellants’ perception it is divisive and purportedly precipitates a conflict of interest. Our conclusion does not change even if the communications in question were, as appellants claim, substantively at variance with the Rules of Professional Conduct.”
Justices Laurence D. Rubin and Patricia A. Bigelow joined Flier in her opinion.
The case is GeneThera, Inc. v. Troy & Gould Professional Corporation, 09 S.O.S. 1213.
Copyright 2009, Metropolitan News Company