Monday, June 11, 2012
C.A. Revives Malicious Prosecution Claim Against Local Law Firm
Kiesel, Boucher & Larson Charged With Knowing That Facts Did Not Support Fraud Case
By KENNETH OFGANG, Staff Writer
The Court of Appeal for this district Friday reinstated claims of defamation and malicious prosecution against a Beverly Hills attorney and his firm.
Div. Four, in an opinion by Presiding Justice Norman Epstein, said an anti-SLAPP motion by Raymond Boucher and Kiesel, Boucher & Larson was erroneously granted by Los Angeles Superior Court Judge Richard Fruin.
The plaintiff in the case is Christopher A. Cole, a former director of Peregrine Systems, Inc. Cole contends there was no basis for Houston, Texas businessman Robert Reese Bains III and other investors in the defunct software company to accuse him of being aware of a massive accounting fraud that preceded the company’s collapse 10 years ago.
Bains said he lost $6.5 million on his investment in Peregrine, and sued much of the company’s management. Cole, along with former chairman John Moores and fellow director Charles E. Noell III won a summary judgment in 2007, although a San Diego Superior Court judge allowed the suit to go forward against defendants who were involved in day-to-day operations.
Cole founded the company in 1981, but resigned as president in 1989 and was an outside director during the time of the fraud. Several of its executives, including a former chief executive officer and a former chief financial officer, went to prison.
The company went through Chapter 11 reorganization. It emerged in 2003 and was sold to Hewlett-Packard in 2005 for $425 million.
Cole, Moores, and Noell, Judge Jeffrey Barton noted, presented direct evidence that they did not know about the fraud committed by Peregrine employees at the time they signed the various financial statements. They also presented evidence that they had relied on the recommendations of Peregrine’s in-house counsel, outside counsel, and outside accounting firm, in signing those statements.
There was, the judge said, little from which to infer that Cole, who retained more than a million shares of the company’s stock during the period in which the fraud was allegedly occurring, knew that the stock price was being artificially inflated.
In 2010, Cole sued the plaintiffs’ attorneys, including Boucher and his firm; San Diego lawyer Patricia Meyer and her firm; Meyer’s former partner, Michael Aguirre, who left private practice following his election as San Diego city attorney in 2004; and Robert P. Ottilie.
Trial Court Ruling
Fruin granted anti-SLAPP motions by Boucher and his firm and by Ottilie, saying that as trial counsel only, it was unlikely they could be held liable for malicious prosecution. He also held that Boucher, Aguirre, and Ottilie could not be held liable for defamation as a result of Meyer and her firm keeping an amended complaint on their website after the summary judgment was granted.
The judge did allow Cole to go forward with his malicious prosecution claim against Meyer and Aguirre. Cole appealed, and Meyer, her firm, and Aguirre cross-appealed.
Epstein wrote Friday that the judge was in error in granting the Boucher and Ottilie motions with respect to malicious prosecution.
“While Cole’s trading of stock was an easy target, defendants have been unable to pinpoint what makes it suspicious,” the jurist wrote, noting that Cole’s stock sales were cleared by the company’s legal department, and that, as the court had noted in the Bains suit, his trading pattern did not vary significantly during the period the fraud was going on.
In fact, Epstein pointed out, the stock price almost doubled in the month after Cole sold 270,000 shares.
The jurist went on to point out that Cole did not live in the San Diego area after he resigned the presidency, had no office at Peregrine, and had no apparent role at the company apart from attending board meetings. Nor, Epstein said, did the defendants refute his showing that he had no knowledge of improprieties apart from publicly available information.
‘Obligation of Informed Judgment’
Boucher and Ottilie, Epstein said, cannot escape liability for malicious prosecution at this stage by claiming they relied on the Meyer firm’s investigation of the case, given that they “allowed themselves to be consistently identified as counsel of record for the plaintiffs” throughout the litigation.
Citing Wright v. Williams (1975) 47 Cal.App.3d 802, 809, the presiding justice wrote:
“As counsel of record, the Boucher defendants and Ottilie had a duty of care to their clients that encompassed ‘both a knowledge of the law and an obligation of diligent research and informed judgment.’
“They contend they relied in good faith on the Meyer defendants’ investigation of the claims in Bains, insisting that this reliance was reasonable because of their prior business relationships with Aguirre and Meyer and the Meyer defendants’ competence and expertise....But even when work on a case is performed by an experienced attorney, competent representation still requires knowing enough about the subject matter to be able to judge the quality of the attorney’s work.”
Nothing that Boucher presented, Epstein said, explained why he officially entered the case from the beginning, if his only role was to present the case at trial.
Boucher did not return a call for comment Friday afternoon.
The case is Cole v. Aguirre & Meyer, B227712.
Copyright 2012, Metropolitan News Company