Monday, February 6, 2017
Company’s Suit Against Ex-Executive’s Attorney Held SLAPP
By KENNETH OFGANG, Staff Writer
An Orange County attorney who allegedly vowed to “destroy” a supplement maker that accused his client of stealing its trade secrets did not act maliciously and was entitled to have the company’s malicious prosecution claim stricken under the anti-SLAPP statute, the Court of Appeal for this district has ruled.
Div. Three Wednesday affirmed Los Angeles Superior Court Judge Susan Bryant-Deason’s ruling in favor of Newport Beach lawyer Stephen E. Abraham. NuScience Corporation, maker of Cellfood, claimed that Abraham maliciously prosecuted a malicious prosecution suit on behalf of former NuScience executive David McKinney.
McKinney left the company in 2008, signing a separation agreement that required him to maintain certain confidences of NuScience.
That same year, NuScience sued several defendants for trade secrets misappropriation and other torts. The defendants included Robert and Michael Henkel, alleged to be nephews of the woman who sold the Cellfood formula to NuScience.
None of the defendants responded, and a default judgment was entered. The relief granted by the court included a permanent injunction barring the Henkels from selling or marketing the plaintiff’s trade secrets or related products, using its trademarks, or contacting any of its competitors, suppliers, or distributors.
In October 2010, the company sued McKinney and Robert Henkel, alleging that they conspired to violate the injunction in numerous respects. Robert Henkel defaulted, but McKinney, represented by Abraham, defended himself vigorously.
NuScience voluntarily dismissed that action without prejudice after the defense filed a motion for terminating discovery sanctions. It subsequently claimed it had done so out of fear the Henkels would otherwise release the company’s “most valuable trade secret” and destroy its business.
Los Angeles Superior Court Judge William Fahey subsequently awarded more than $30,000 in fees and costs to McKinney under the Uniform Trade Secrets Act, finding the action to have been brought in bad faith. The Court of Appeal, however, reversed in an unpublished 2012 opinion, saying the company had a good faith basis for its action, in that it had previously received copies of emails sent between the defendants suggesting they had an interest in marketing some product that they felt a need to be secretive about.
Malicious Prosecution Suit
In between the trial and appellate court rulings in that case, McKinney, represented by Abraham, sued NuScience for malicious prosecution. The complaint claimed that the company’s claims for trade libel, misappropriation, and racketeering were brought without probable cause.
NuScience then brought a successful anti-SLAPP motion, the court finding that it was undisputed that the underlying action was voluntarily dismissed in response to “extortionist threats” and not terminated in McKinney’s favor on the merits. Nor, the court found, did McKinney establish that the claims were brought without probable cause.
NuScience was awarded nearly $130,000 in attorney fees, and the Court of Appeal affirmed.
NuScience then sued Abraham, in 2014. Two of the original causes of action—for malicious prosecution and intentional interference with contractual relations—were still pending when Bryant-Deason granted the anti-SLAPP motion.
The judge ruled that both causes of action arose from protected activity in connection with the prior litigation, that the business tort claim was barred by the litigation privilege, and that NuScience lacked a probability of winning on the malicious prosecution claim because Fahey’s ruling established probable cause for the filing of the previous action, and because there was no substantial evidence of malice. Bryant-Deason awarded nearly $100,000 in attorney fees to Abraham.
Court of Appeal Opinion
Presiding Justice Lee S. Edmon, in her unpublished opinion last week for the Court of Appeal, said the trial judge was correct. NuScience, she concluded, could not win on its malicious prosecution claim because it could not establish malice.
Edmon emphasized that a plaintiff, in order to prevail on a malicious prosecution claim against the attorney for its previous adversary, must establish malice on the part of the attorney, not merely impute the client’s malice to its advocate. NuScience, she said, failed to do this.
Abraham’s alleged threat to “destroy” NuScience, she said, was, in proper context, merely a prediction as to the outcome of the litigation, not a declaration of intent on the attorney’s part to put the company out of business.
Attorneys on appeal in NuScience Corporation v. Abraham, B264334, were Michael J. Saltz, Colby A. Petersen and Blair Schlecter of Jacobson Russell Saltz Nassim & De La Torre for NuScience, and Phillip A. Levy for Abraham.
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