Tuesday, July 2, 2019
Page 1
Court of Appeal:
Suit Against Lawyers to Recoup Stolen Funds Not a SLAPP
Judgment Creditors of Two Swindlers Claim Moneys Paid to Law Firm, Attorney for Criminal Defense Belong to Them Because Fees Were Received With Knowledge of Theft From Them
By a MetNews Staff Writer
The Court of Appeal for this district yesterday affirmed the denial of an anti-SLAPP motion filed by an attorney and a law firm who are being sued by their clients’ judgment creditors, saying that fees received by the lawyers in payment of the clients’ criminal defense are moneys belonging to them.
The holding came in an opinion that was not certified for publication. Presiding Justice Frances Rothschild of Div. One was the author.
It affirms an order by Los Angeles Superior Court Judge Yvette M. Palazuelos in favor of the judgment creditors, C&M Investment Group Ltd. and Karlin Holdings Limited Partnership, and against Manhattan Beach attorney Walter Urban and the Costa Mesa law firm of MLG Automotive Law, APLC.
Grand Theft
Urban (erroneously referred to in the opinion as Keith Urban, a singer/songwriter) and MLG defended Richard Powers and Neil Campbell on felony grand theft charges. Powers initially hired Urban to represent him, then substituted in MLG, which had been representing Campbell from the start.
Both men were convicted.
The charges stemmed from swindling C&M and Karlin. A judge awarded $24 million against Campbell, reflecting $8 million that was stolen trebled under the Racketeer Influenced and Corrupt Organizations Act, and ordered entry of a $37 million default judgment against Powers.
The complaint alleges that when Urban and MLG provided services, they knew the money being paid to them belonged to C&M and Karlin.
‘Litigation Funding’
Both defendants argued that the lawsuit against them stems from “litigation funding” which, they asserted, is “protected activity,” bringing into play the anti-SLAPP statute. Rothschild disagreed, explaining:
“MLG and Urban cite several decisions concluding that payment of attorney fees to pursue or defend against civil litigation may constitute protected conduct….But the reasoning animating these civil cases does not apply to an attorney’s receipt of legal fees for representing a client in criminal proceedings. This stems from the disparate roles private counsel plays in civil versus criminal litigation. There is no constitutional right to an attorney in civil cases, meaning the only way a civil litigant can petition the court through an attorney is by successfully retaining private counsel. Thus, in civil cases, a litigant’s ability to retain a private attorney affects the fundamental nature of her petitioning conduct before the court; that is, whether the litigant can petition with the assistance of counsel or not. Because retaining a private attorney has such potential to change the scope of a civil litigant’s petitioning conduct, actions necessary to retain counsel—payment and receipt of civil litigation funding—are ‘in furtherance’ of petitioning conduct and protected under the anti-SLAPP statute.”
She continued:
“In the criminal context, however, securing private representation has no effect on whether a defendant can petition the court through counsel, because the court will appoint an attorney to represent a criminal defendant if the defendant is financially unable to retain one. Thus, unlike in the civil context, a criminal defendant’s ability to retain a private attorney—including payment and receipt of legal fees—cannot change the scope of the petitioning conduct in which the defendant can engage; that is, whether he can petition with the assistance of counsel or not. Thus, unlike in the civil context, actions associated with the retention of private counsel in a criminal case—such as the payment and receipt of litigation funding—are not in furtherance of petitioning conduct.”
Protected Activity
The anti-SLAPP statute, Code of Civil Procedure §425.16, requires that the action, in order to be subject to a special motion to strike, be “in furtherance” of protected activity. Rothschild agreed with Urban and MLG that their representation in criminal proceedings “is an act in furtherance of Campbell’s and Powers’s rights to petition the courts, and thus constitutes protected activity.”
However, Rothschild saw no connection between that representation and the causes of action being pursued—for conversion, receiving stolen property, and conduct in violation of the Unfair Competition Law.
She said that “were one to delete from the complaint all references to MLG and Urban’s representation of Campbell and Powers,” the elements of the causes of “would remain satisfied.”
The jurist elaborated:
“Specifically, MLG and Urban allegedly injured plaintiffs by accepting $475,000 plaintiffs might otherwise have been able to collect from Campbell and Powers to satisfy plaintiffs’ judgments. Such injury is measured by the amount accepted, and would remain the same, regardless of what services MLG and Urban performed in exchange.”
Supreme Court Decision
Urban and MLG argued that if the anti-SLAPP statute is found inapplicable, it will chill defendants’ chances of obtaining counsel. Rothschild, in rejecting the policy argument, quoted the 1989 U.S. Supreme Court decision in Caplin & Drysdale, Chartered v. United States as saying that a defendant “has no Sixth Amendment right to spend another person’s money for services rendered by an attorney, even if those funds are the only way that that defendant will be able to retain the attorney of his choice.”
She commented:
“Just so here: Plaintiffs’ theory of liability is not that MLG and Urban simply accepted legal fees, but rather that they accepted legal fees they knew to effectively belong to someone else. And, as discussed above, even if a chilling effect were to result from our decision and render a criminal defendant unable to secure private counsel, under no circumstances would a criminal defendant be forced to defend himself without the benefit of counsel. Rather, he would have the benefit of a court-appointed attorney, as well as both state and federal constitutional safeguards assuring his attorney provides him effective and meaningful counsel.”
The case is C&M Investment Group v. MLG Automotive Law, B285306.
Attorneys on appeal were Johnathan A. Michaels of MLG Automotive Law and Costa Mesa attorney Daniel Uribe for MLG; Tarik S. Adlai for Urban; and Luke L. Dauchot, and Lauren J. Schweitzer of the downtown Los Angeles firm of Kirkland & Ellis for C&M and Karlin.
Copyright 2019, Metropolitan News Company