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O’Melveny Fails to Get Bill-Padding Allegations Stricken
C.A. Won’t Order Excision of Claim That the Firm Was Involved in a Conflict of Interest, but Does Direct That Anti-SLAPP Motion Be Granted As to Averment That Two Retired Judges Played an Improper Role
By a MetNews Staff Writer
O’Melveny & Myers, an international law firm founded in Los Angeles in 1885, yesterday failed in its bid to have allegations that it padded its bills and was involved in a conflict of interest, stricken from a cross-complaint against it, but did gain a limited reversal by Div. Two of the Court of Appeal for this district of the denial of its anti-SLAPP motion.
The firm, the oldest in Los Angeles, is suing Ocean Towers Corporation, a cooperative housing corporation, for $1,040,197.18 in unpaid legal fees. The fees were incurred in connection with representation of a litigation committee that was set up to investigate claims that Ocean Towers’s president and chief executive officer, Joseph Orlando conspired with a board member, John Spahi, causing the corporation “to incur significant expenses” for Spahi’s “personal benefit.”
Ocean Towers’s cross complaint alleges that the $1.27 million it already paid was too much because O’Melveny had charged “exceptionally high hourly rates for tasks that were unnecessarily performed by far more lawyers than were needed” and engaged in “bill padding and duplicative billing.” It asserts also that O’Melveny had a conflict of interest because it was the lawyer for Orlando and Spahi who enlisted its representation of the committee.
That committee, it averred, was improperly constituted because it included retired Los Angeles Superior Court Judges Michael Latin and James Steele, who are not shareholders in the corporation.
Kleifield’s Ruling
Los Angeles Superior Court Judge Steven J. Kleifield, in denying O’Melveny’s anti-SLAPP motion, said the cross-complaint was “directed toward whether O’Melveny had the right to the fees in the first instance, and the reasonableness of those fees,” declaring:
“Resisting what is essentially a collection action is not a SLAPP.”
Justice Judith Ashmann-Gerst authored yesterday’s opinion, which was not certified for publication.
Agreeing with Kleifield, she said that “disputes about the validity of an attorney’s fees or billing practices do not arise from protected petitioning activity.”
First Prong
Responding to O’Melveny’s insistence that the funding of a civil action is petitioning activity that is protected conduct, satisfying the first prong of the anti-SLAPP statute, Code of Civil Procedure §425.16, the justice said that the proposition does not inure to O’Melveny’s benefit. She wrote: “In civil cases, funding the services of an attorney to prosecute or defend a lawsuit is an act in furtherance of petitioning activity that is protected under the anti-SLAPP statute….This makes sense in the arena of civil litigation; because there is no right to counsel, the ability to retain private counsel for litigation can affect its course and outcome. As a result, the funding of litigation has been found to be petitioning activity when the money spent was to ensure a party could commence and maintain a legal action….
“Applied to the instant appeal, this proposition implies that the anti-SLAPP law would protect Ocean Towers from a lawsuit targeting the propriety of its payments to O’Melveny, rather than protecting O’Melveny (who did not fund any litigation) from a lawsuit brought by a contractually obligated payor challenging the firm’s allegedly unethical charging and billing practices.”
Conflict of Interest
Ashmann-Gerst said that allegation in the cross-complaint as to a conflict of interest “are not based on protected activity for similar reasons as the allegations about O’Melveny’s fees and billing practices,” explaining:
“Like allegations in a fee dispute, the gravamen of a conflict of interest allegation is the law firm’s violation of its professional duties. Thus, despite O’Melveny’s assertions to the contrary, an attorney’s representation of a client while laboring under a conflict of interest in violation of his or her ethical duties does not, in itself, involve protected activity.”
However, she said that the appointment of Latin and Steele to the committee was protected activity because the court selected them and they were placed on the committee by a board resolution. Quoting language in Code of Civil Procedure §425.16(e), Ashmann-Gerst said:
“Judge Steele and Judge Latin were appointed to the Committee via a ‘writing made before a...judicial proceeding’ (i.e., the court order) as well as a ‘writing made in connection with an issue under consideration or review by a...judicial body’ (i.e., the Board resolution carrying out the court order)…. These communicative acts are expressly protected by the anti-SLAPP statute.”
Second Prong
Proceeding to the second prong of the statute—minimal merit—the justice wrote:
“On our own review of the record, we conclude that evidence submitted with the pleadings, as a matter of law, establishes that Ocean Towers cannot prevail on its claims to the extent that those claims rely on allegations that Judge Steele and Judge Latin were wrongfully appointed.”
She pointed out that the bylaws had been amended to permit persons who were corporation directors to serve on a committee. “We remand the matter and direct the trial court to strike those portions of the cross-complaint alleging that Judge Steele and Judge Latin were wrongfully appointed to the Committee,” the opinion directs.
The case is O’Melveny & Myers v. Ocean Towers Housing Corp., B322792.
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