Wednesday, October 22, 2014
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Suit Against Law Firm Over Settlement Proceeds No SLAPP—C.A.
By KENNETH OFGANG, Staff Writer
A suit between an insurance company and a law firm over distribution of settlement proceeds did not involve advocacy on a public issue, so the insurer’s complaint was not subject to a special motion to strike under the anti-SLAPP law, the Sixth District Court of Appeal ruled yesterday.
The panel affirmed a Santa Clara Superior Court judge’s order denying The Boccardo Law Firm’s anti-SLAPP motion.
The plaintiff, Old Republic Construction Program Group, was the workers’ compensation carrier for the employer of Albert Carabello, who was operating a pickup truck in the course of his employment when the vehicle was involved in a collision.
Old Republic alleged that it paid Carabello workers’ compensation benefits that exceeded $100,000, which was the limit of the other driver’s policy. Carabello, represented by John Stein of the Boccardo firm, sued the other driver in San Joaquin Superior Court, and Old Republic intervened.
Affirmative Defense
The defendant in that action raised an affirmative defense under Witt v. Jackson (1961) 57 Cal.2d 57, which limits the ability of an employer, or its insurer, to obtain reimbursement out of an injured worker’s recovery against a third party where the employer’s own negligence contributed to the worker’s injuries. The defendant’s insurance carrier subsequently agreed to settle for the policy limits, leaving Old Republic’s reimbursement claim pending.
The insurer made the settlement check payable to the plaintiff, the Boccardo firm, and Old Republic. Stein and the workers’ compensation carrier then stipulated that the money would be placed in an interest-bearing account—presumably the firm’s trust account—and that signatures of both parties would be required for withdrawals.
Old Republic later dismissed its complaint in intervention, and the plaintiff dismissed his complaint against the driver. Stein moved for a court order allowing him to distribute settlement proceeds, arguing that by dismissing its complaint in intervention, Old Republic forfeited any claim under Witt.
The judge denied relief, saying he had no power to act because all of the affirmative pleadings had been dismissed. Stein then notified Old Republic that he intended to disburse the funds.
Petition to WCAB
Old Republic petitioned the Workers’ Compensation Appeals Board to allocate the funds. The workers’ compensation judge found that the Boccardo firm had already distributed the funds and that the WCAB lacked jurisdiction, but the board reversed and remanded the case for trial.
Prior to the board’s ruling, however, Old Republic filed its Santa Clara Superior Court action against the Boccardo firm, claiming that the law firm’s distribution of proceeds without the carrier’s approval constituted a breach of contract. The complaint also pled claims for fraud, conversion, and negligent breach of fiduciary duty, and sought declaratory relief.
Judge Peter Kirwan struck the fraud cause of action, but denied the anti-SLAPP motion as to the claims for breach of contract, negligence, and declaratory relief. The law firm appealed the denial as to those claims, but Presiding Justice Conrad Rushing said the trial judge was correct.
Rushing explained that “in determining whether a cause of action arises from conduct protected by the anti-SLAPP law, the focus is on the wrongful, injurious acts or omissions identified in the complaint, and whether those acts or omissions come within the statute’s description of protected conduct; and (2) unless the wrongful conduct is communicative in character, it is protected by the statute only if it was undertaken in connection with an issue of public importance.”
In this case, he went on to say, there was neither communicative conduct nor an issue of public importance.
Justice’s Reasoning
The insurer’s claims, he clarified, arose from the withdrawal of the funds, not from the parties’ stipulation. The insurer is not claiming that the law firm committed a breach of contract or of fiduciary duty by entering into the stipulation, it is claiming that it did so by distributing the money rather than leaving it in the trust account until the parties’ disagreement was finally and fully resolved, the justice said.
“To hold otherwise would produce consequences the Legislature cannot have intended. If the protected status of an underlying agreement furnished sufficient ground to invoke the anti-SLAPP statute against a claim for breach of that agreement, it would follow that every suit to enforce a settlement agreement would be subject at the threshold to a SLAPP motion,” Rushing wrote. “Such a regime would significantly diminish the utility of such agreements, reduce the incentive for parties to enter into them, and thereby magnify the workload on courts, with attendant delay and expense for those who must resort to them.“
The case is Old Republic Construction Program Group v. The Boccardo Law Firm, Inc., 14 S.O.S. 4645.
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