Wednesday, March 18, 2020
Court of Appeal:
By a MetNews Staff Writer
The Court of Appeal, in a 2-1 decision, has held that a lawsuit for malicious prosecution may proceed against the erstwhile plaintiffs in a putative class action who claimed that they were deluded into purchasing designer jeans by false “Made in the U.S.A.” labels on them, with a dissenter protesting that the underlying action was valid when brought and was voluntarily terminated in light of a statutory change.
Acting Presiding Justice Richard D. Huffman of the Fourth District’s Div. One wrote for himself and Justice Judith Haller in affirming the denial of an anti-SLAPP motion; Justice William Dato dissented. Their opinions were filed on Feb. 21, and not certified for publication, but on Monday were ordered published in the Official Reports.
The underlying action was instituted in 2014 in the U.S. District Court for the Southern District of California by Louise Clark who said she purchased a pair of “Boyfriend”-style jeans for $218 at a Macy’s outlet. The jeans, bearing a label proclaiming, “Made in the U.S.A.,” were manufactured by defendant Citizens of Humanity.
Clark’s diversity action was brought under California’s Business & Professions Code §17533.7 which bars use of such a label where goods have been “entirely or substantially made, manufactured, or produced outside the United States.” As then worded, it provided no exceptions, and was strictly construed by California courts.
Elements of Citizens’s jeans—including the “fabric, thread, buttons, rivets, and/or certain subcomponents of the zipper assembly”—were imported, the operative pleading alleged.
Representing the plaintiff were attorneys John H. Donboli and J.L. Sean Slattery of the Del Mar Law Group LLP.
Clark made various admissions at her deposition and acknowledged that she is the sister-in-law of Slattery. The familiar relationship prompted Citizens to seek the recusal of the Del Mar Group.
Plaintiff Bows Out
Before a ruling came on the disqualification motion—which District Court Judge Janis L. Sammartino ultimately denied—Clark bowed out as the representative plaintiff, saying that with all the fuss over her being related to a lawyer in the case, she no longer felt comfortable “being ‘in the spotlight’.” With the judge’s assent, a new representative plaintiff, Coni Hass, was, in 2016, brought in, and an amended pleading was filed.
Hass had allegedly purchased from a Nordstrom store “Ingrid”-style jeans, made by Citizens.
Meanwhile, §17533.7 had been amended to permit limited use of imported materials in garments bearing a “Made in the U.S.A.” label. Citizens moved for dismissal of the complaint because it was based on the unamended statute and because Hass was seeking to represent all purchasers of Citizens’s jeans, not restricted to those who bought denim pants of the same style she chose.
Sammartino on Dec. 6, 2016, dismissed the complaint without prejudice, the federal analogue to a California trial court sustaining of a demurrer with leave to amend. She noted that the pleading did not reveal whether the amount of the incorporated imported material was permissible under the amended statute and ruled that the complaint may be revised, if possible, to reflect the continued existence of a claim.
The judge said, as to Hass’s standing:
“Plaintiff seeks to represent a class of California purchasers who have purchased any of Defendant’s apparel products bearing the allegedly misleading ‘Made in the U.S.A.’ labels, not just the specific brand of jeans Plaintiff purchased….However, Plaintiff’s [pleading] fails to describe or even identify any other type of apparel product made and sold by Defendant, let alone demonstrate that those products and their labels are substantially similar to the Ingrid brand jeans Plaintiff purchased. Thus, the Court finds that, as currently pled, Plaintiff lacks standing to proceed either for herself or on behalf of others as to products she did not purchase.”
She was granted leave to amend her allegations relating to standing.
In response, Hass advised that she would not amend, and was voluntarily dismissing the action. Sammartino ordered a dismissal with prejudice.
Citizens then brought suit in the San Diego Superior Court against Clark, Hass, Del Mar Law Group LLP, Donboli and Slattery for malicious prosecution.
Judge Kenneth J. Medel denied the defendants’ anti-SLAPP motion, finding that, while the action did stem from the defendants’ protected activity in litigating claims in the District Court, the plaintiff satisfied the second prong of Code of Civil Procedure §425.16 by showing minimal merit. The Court of Appeal’s majority agreed.
An anti-SLAPP motion, Huffman noted, entails a “summary-judgment-like” procedure and, he declared, the existence of disputed material issues of fact in the case relating to whether Clark had probable cause to bring suit and whether the attorneys acted reasonably in representing her precludes granting a special motion to strike.
Huffman noted evidence submitted by Citizens reflecting previous consumer actions brought by Del Mar Law Group, with Clark, as the supposedly victimized consumer, being the representative plaintiff.
“[I]f Citizens merely called Clark a liar or asserted she was a shill, without evidence, we would find probable cause existed. However, that is not the record before us.
“Instead, Citizens proffered significant evidence to support the reasonable inference that Clark was a shill plaintiff, and the Del Mar Attorneys were aware of this fact. It is undisputed that Slattery is Clark’s brother-in-law, and that Clark was a named plaintiff in Slattery’s firm’s prior Made-in-USA labeling lawsuits involving air freshener and nasal spray products. Clark also was the named plaintiff in an ingredient mislabeling lawsuit filed by the Del Mar Attorneys against a dog food company. Although these facts alone would not support a reasonable inference that Clark was a shill, when combined with other facts that became apparent at Clark’s deposition, we determine that a reasonable inference could be drawn that Clark was a shill plaintiff.”
With respect to Citizens’s action against Donboli, Slattery, and their firms, Huffman recited:
“Citizens argues no reasonable attorney would have sued on Clark’s behalf, or continued litigating on her behalf when her deposition testimony revealed she was not misled. Its theme, echoed throughout the briefs, is that Clark is a ‘shill’ who, with her brother-in-law, Slattery, participates in a cottage-industry of contrived ‘Made in the U.S.A.’ labeling lawsuits. Citizens asserts that the Del Mar Attorneys years ago ‘developed a scheme to misuse the court system for their own financial gain.’ ”
The jurist said the Del Mar Attorneys’ response was that Clark did in 2014 buy a pair of jeans made by Citizens labeled, “Made in the U.S.A.” which, under the strictly construed statutory law at the time, was legally impermissible.
There was sufficient evidence of malice on the part of the plaintiffs and the attorneys to support an action for malicious prosecution, Huffman said, and the voluntary dismissal of the federal action constitutes the necessary favorable termination for Citizens.
Dato said in his dissent:
“The theory of the underlying case was not all that complex. Both Clark and Hass alleged they purchased Citizens jeans that were labeled ‘Made-in-U.S.A.’ To the extent the jeans were made with any foreign components, that violated former section 17533.7 and gave rise to various causes of action. The question on an anti-SLAPP motion is whether Citizens proffered evidence that, if proven, would support a judgment in its favor. On the question of probable cause, that requires a finding that no reasonable attorney would have believed initiating an action on Clark’s or Hass’s behalf was tenable. Citizens simply does not meet its burden.
He expressed this concern:
“[P]ermitting this malicious prosecution plaintiff its day in court will, I fear, do much to chill the ability of other plaintiffs in all types of cases to seek fair redress of their grievances. Even more troubling, in my view, is the chilling effect this may have on lawyers asked to represent them. Will attorneys now infer they would be advised not to represent family members on something less than open-and-shut cases? Or that a law firm should cease to represent a client after filing a few similar lawsuits on her behalf? If a client becomes confused and performs poorly at a deposition, will a reasonable attorney feel compelled to jump ship? And must an attorney direct a heightened level of scrutiny to information provided by a client before filing suit?
“I hope these are not the inferences that are drawn by most lawyers. No doubt they are not the inferences intended by the majority. But if we learn nothing else from this case, we should certainly understand that the strength and reasonableness of inferences often lies in the eye of the beholder.”
Motion Was Valid
“To be sure, today’s holding simply permits a malicious prosecution action to move forward, without in any way suggesting Citizens will ultimately prevail. But this is precisely the sort of harm the anti-SLAPP statute was designed to target and precisely the result the procedure is designed to forestall. Based on Citizens’s conduct, this case was ‘arguably meritorious’ when it was filed….Although plaintiffs ultimately did not succeed when the law changed, I believe the anti-SLAPP procedure should have enabled them and their counsel to defeat this speculative malicious prosecution action at an early stage of litigation.”
The case is Citizens of Humanity, LLC v. Hass, 2020 S.O.S. 1208.
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