Lorelei M. TRENFEL, Plaintiff and Appellant, v. Kevin JASPER et al., Defendants and Respondents.
We review a double summary judgment entered in favor of defendants, Howard Silberman and his professional accounting corporation, and Kevin Jasper, individually and as a partner of the law firm Jennings, Jasper, Weitzen and Drakulich, on the theory that the litigation privilege of Civil Code 1 section 47, subdivision (b)(2) protected certain communications made by these defendants in the course of their professional relationships with their mutual client, plaintiff's former employer, her mother Goldene Trenfel (Mother), and the family automobile dealership which Mother owned and controlled through a family company. These communications were made during the four months immediately preceding the termination of employment of plaintiff and appellant Lorelei Trenfel (plaintiff) as general manager of the family dealership. In an underlying lawsuit, plaintiff sued the family dealership and Mother and others for wrongful termination.2 This action soon followed, in which plaintiff sued these defendant professionals, Silberman as accountant and Jasper as attorney, on theories of intentional interference with economic advantage and contractual relations, conspiracy, professional malpractice and negligence, and slander.
Our review of this record discloses that triable issues of fact remain as to the first prong of the test for the applicability of the litigation privilege, as set forth in Silberg v. Anderson (1990) 50 Cal.3d 205, 212, 266 Cal.Rptr. 638, 786 P.2d 365, i.e., whether these communications were “made in judicial or quasi-judicial proceedings.” 3 We also conclude that triable issues of fact remain as to whether the alleged communications are protected prelitigation preparation and publications, or unprotected tortious conduct separate from any judicial proceeding. (Kimmel v. Goland (1990) 51 Cal.3d 202, 205, 271 Cal.Rptr. 191, 793 P.2d 524.) We reverse the summary judgments entered, along with an underlying discovery order, with directions to the trial court to conduct such further proceedings as may be appropriate, including an in camera hearing on the disputed discovery if plaintiff renews her motion. We affirm, however, an underlying order for monetary sanctions against plaintiff for discovery abuse entered pursuant to Code of Civil Procedure sections 2023 and 2031.
FACTUAL AND PROCEDURAL BACKGROUND
In her first amended complaint, plaintiff sets out the background facts of her disputes with these defendant professionals, accountant Silberman and attorney Jasper. Plaintiff's parents, George and Goldene Trenfel, were the owners of Trenfel Motors, Incorporated, the 99 percent owner of a Toyota car and truck dealership doing business as Toyota of El Cajon. Plaintiff's brother, William Trenfel (Brother), acted as general manager of the family dealership from 1982 to 1986, when he was ousted by the parents and plaintiff was installed in his place as general manager. The dealership's contract with the Toyota distributor, Toyota Motors Distributors, Inc. (distributor), required the family dealership to obtain its approval of the appointment of a new general manager, and this was given as to plaintiff in 1987. Shortly thereafter, George Trenfel died, and plaintiff continued to fulfill the duties of acting general manager from August 24, 1987 until she was terminated from that position by Mother on April 22, 1988. Mother then sought to obtain distributor's approval of Brother as plaintiff's replacement as general manager.
These events gave rise not only to the underlying lawsuit, in which plaintiff sued Mother and the dealership entities and brother for wrongful termination (see fn. 2, ante ), but also this action against Silberman and Jasper, the accountant and attorney employed by Mother and the dealership during the period before plaintiff's termination and for some years previously. Plaintiff alleges that although attorney Jasper remained corporate counsel for the dealership during her tenure as general manager, she did not use him or his firm for any of the business affairs of the dealership. She also alleges that in the winter of 1987 she hired another accountant to review the bookkeeping and financial system of the dealership, although Silberman remained the corporate accountant for the dealership. She alleges that Silberman and Jasper knew of these acts and became concerned about the potentiality of being replaced at the dealership sometime in the future, and accordingly “knowingly and falsely alleged that [plaintiff] had threatened the viability of the Dealership through mismanagement, that she was ‘stealing’ money from the DEALER, and that she may be involved in ‘criminal activity.’ ” She alleges that neither Silberman nor Jasper ever attempted to put her on notice of any alleged deficiencies in her management of the business. Plaintiff then contends that Silberman and Jasper advised Mother to tortiously breach plaintiff's employment contract and/or interfere with her prospective economic advantage by advising that she be terminated. She goes on to allege a conspiracy between Silberman, Mother and Brother to accomplish the above-stated torts.
In further causes of action, plaintiff alleges that both defendants, Silberman and Jasper and their professional firms, acted in bad faith and failed to use reasonable care and skill in the purpose for their employment by misrepresenting to Mother the true financial condition and practices of the dealership and by negligently advising her regarding the need for a change in management of the dealership. This malpractice cause of action includes allegations that plaintiff was a personal client of each of the two defendant professionals, as well as a third party beneficiary of their work for the family business. She thus alleges a conflict of interest existed on the part of these defendant professionals. In addition, she contends that attorney Jasper performed professional services for the Trenfel family, including creation of a family trust, of which plaintiff was an intended beneficiary. Finally, plaintiff alleges that by impugning her professional competence and accusing her of criminal activity, Silberman and Jasper committed slander per se. (Civ.Code, § 46.) General, special, and punitive damages are sought.
The basic facts alleged in the pleadings were fleshed out at the summary judgment proceedings. Beginning in December 1987, while performing year-end tax and other work at the dealership, Silberman became aware of financial problems there. He went to the dealership's bank with Mother to review signature cards and account balances to attempt to monitor the cash flow that was going on. He noticed further problems with the books in February of 1988, including that money had been withdrawn by plaintiff from Mother's personal property account, on which plaintiff was a signatory, and had been transferred to dealership accounts. Silberman and Mother met in mid-February while Silberman was in the middle of the year-end work to discuss the dealership's various financial problems. Mother also attempted to discuss dealership finances with plaintiff in early 1988, but was told not to worry about it.
Mother, Silberman, and Jasper had various telephone calls and meetings with each other from early 1988 through April of 1988 to discuss the financial problems. In particular, the problems included changes in salary for plaintiff (tripling from $5,000/month to $15,000/month) and the dealership's business manager, Joan West, their withdrawal of funds characterized as advances or loans to plaintiff in the amount of $100,000, the manner in which that withdrawal of funds was reflected on financial statements, check bouncing, non-payment of rent by the dealership to Mother for the real property where the dealership was located, financial losses during the fourth quarter which were occurring to the formerly profitable dealership, misstatement of the dealership's cash position and bank account balances, and the unusually large list of contracts in transit (the “heat sheet”), amounting to over $1.1 million.
In a meeting between Mother and Silberman in mid-February, the possibility of terminating plaintiff was discussed as one of several possible options available (others being going on as they were or selling the business). The same options were discussed at another meeting one week later. During this time, plaintiff did not communicate with Silberman, and he discussed the dealership's financial problems only with Mother and Jasper.
Mother, Silberman, and Jasper met again on March 16 to discuss the problems and possible alternatives, including terminating plaintiff as general manager. At another such meeting between Mother and Jasper on April 15, where Brother was also present, Silberman participated only by telephone. Jasper testified that Mother formed the plan to remove plaintiff as general manager about a week before an April 19 phone call was made to the Toyota distributor by Jasper to arrange a meeting to seek its permission to remove plaintiff as general manager and substitute Brother in her place. Brother had been searching without success for an appropriate candidate, who Jasper testified would have to be paid approximately $125,000 to $150,000 yearly salary.
Plaintiff learned of Mother's plans to meet on April 21, 1988, with the distributor in order to seek permission to remove plaintiff as general manager.4 On plaintiff's behalf, attorney Bud Murfey wrote several letters to Jasper demanding that no such meeting take place, alleging that attorney Jasper had an irreconcilable conflict of interest because he represented not only Mother and the dealership, but had also formerly represented plaintiff. Jasper was advised in the letters:
“[W]e will hold you and your firm financially responsible should a conflict of interest exist[ ]․ ¶ ․ ¶ Should you wish to proceed on this basis, you do so at your own risk․ ¶ Should you and your firm, nevertheless, proceed on this path, I am instructed by my client to demand that you notify me immediately of your insurance malpractice carrier because my client intends to proceed with a claim against you and your firm․ ¶ ․ ¶ Accordingly, we contend, allege, and assert that any communications by you, your firm, or your clients, is [sic ] a publication of inflammatory, libelous, and/or slanderous materials which will most certainly lead to protracted litigation. Again, we will hold you, your firm, and your clients responsible should there be any dissemination of the matters outlined in this and previous correspondence and conversations.”
Jasper responded in kind to the letters, suggesting that Murfey “please try to wrap up this letter writing nonsense before the warranty on my FAX machine expires.” (Original italics.)
At the April 21, 1988 meeting with the distributor, Jasper advised Mother of the likelihood of lawsuits over problems at the dealerships, including potential wrongful termination suits by plaintiff or by Joan West, and notified Mother and the distributor's representative that they were potential witnesses or parties to litigation and thus were not at liberty to discuss specifics relating to employment termination. At a later proceeding before a state agency, the New Motor Vehicle Review Board, concerning its intent to terminate the dealership, Mother testified that she did not believe plaintiff's threats of litigation were frivolous. According to Mother, such threats of litigation could have included slander and libel claims as well as wrongful termination.
Plaintiff was asked by Mother on April 21, 1988, to tender her resignation. She refused and told Mother that several lawsuits were possible. She was given her notice of termination on April 22, 1988. She then decided to pursue any legal remedies that she might have, and a month later sued the dealership, Mother and Brother in the underlying action for wrongful termination. (See fn. 2, ante.) 5 Approximately a year after the termination, this lawsuit against the Jasper and Silberman defendants was filed.
Further information about the background of the case is contained in the declarations submitted in support of and opposition to the summary judgment motions. Silberman's declaration states that during the time he was discussing with Mother and Jasper various problems at the dealership, he was concerned with the possible legal and business ramifications of what he was discovering. He believed these included possible breaches of fiduciary duties owed by plaintiff to the dealership and, in his opinion, litigation against plaintiff was always a realistic possibility. Eventually, in the underlying wrongful termination action, the dealership brought a cross-complaint against plaintiff for breach of fiduciary duties.
Plaintiff filed a declaration in opposition to the Silberman motion, outlining the factual background of her accession to the position of general manager of the dealership, and stating that she told Mother she was not happy with either Silberman's or Jasper's work for the dealership. Plaintiff goes on to declare that business was going well at the dealership. While she was general manager there, she received several Toyota awards for her sales record and, although some expenses did temporarily increase, they were acceptable and proper expenditures for remodeling, lighting and signage improvements. Although there was a temporary cash flow problem in December 1987, it was being successfully resolved by the time plaintiff was terminated. Plaintiff also states that the salary increases and bonuses awarded to herself and Joan West were proper and in accordance with the wishes of her father. Plaintiff goes on to deny that she took any money from any personal account belonging solely to Mother to subsidize dealership expenses. Plaintiff states: “I did not anticipate my termination from the Dealership until on or about April 19, 1988.”
Plaintiff's declaration also states that after Mother met with the distributor and asked for her resignation, plaintiff in refusing did not threaten Mother with a lawsuit. It was not until the week following her termination that she first decided to pursue the legal remedies available to her for the termination. In conclusion, plaintiff denies that she mismanaged the dealership or that it went from a strong position to a weak position during her tenure. Plaintiff's declaration in opposition to the Jasper motion is to the same effect, adding that she previously regarded Jasper and his firm as her family attorneys before the time of her termination. Plaintiff denies that she had any intention of starting any legal proceedings by asking attorney Murfey to correspond with Jasper advocating against the meeting on April 21, 1988, with the distributor.
In separate hearings, the motions for summary judgment by Jasper and Silberman were granted.6 Plaintiff appealed both orders and this court consolidated the appeals.
In our review of these summary judgments, the following principles apply:
“The summary judgment procedure aims to discover whether there is evidence requiring the fact-weighing procedures of a trial. [Citation.] ‘[T]he trial court in ruling on a motion for summary judgment is merely to determine whether such issues of fact exist, and not to decide the merits of the issues themselves.’ [Citation.] The trial court decides whether triable issues exist by examining the affidavits and evidence before the court, including any reasonable inference which may be drawn from the facts presented. [Citation.] ¶ In reviewing the propriety of a summary judgment, the appellate court must resolve all doubts in favor of the party opposing the judgment. [Citation.] The reviewing court conducts a de novo examination to see whether there are any genuine issues of material fact or whether the moving party is entitled to summary judgment as a matter of law. [Citation.]” (M.B. v. City of San Diego (1991) 233 Cal.App.3d 699, 703–704, 284 Cal.Rptr. 555.)
It is well established that “the privilege to defame in the course of judicial proceedings is not limited to statements during trial but can extend, notwithstanding the phrasing of the statute, to steps taken prior thereto. [Citations.]” (Lerette v. Dean Witter Organization, Inc. (1976) 60 Cal.App.3d 573, 577, 131 Cal.Rptr. 592.) In reaching this conclusion, the court in Lerette referred to the formulation of the litigation privilege in the Restatement of Torts as extending to “communications preliminary to a proposed judicial proceeding.” (Rest.2d Torts, § 586, com. a.) The court added a qualification to its holding at page 578, footnote 6, as follows:
“We recognize that the fact that a suit eventually is filed does not protect all defamatory communications made prior to the filing. But most potential abuse of this privilege for prelitigation communications can be prevented by enforcement of the relevancy requirement [that the communication have some logical relation to the action and be made to achieve the objects of the litigation]. [Citations.]”
Thus, the court in Lerette held that the sending of a settlement demand letter was privileged conduct, even though the letter was not sent in any judicial proceeding then actually underway and the attorney who wrote the letter was not at the time the letter was written (or thereafter) counsel of record for the client for whom he wrote the letter in any such judicial proceeding. (Lerette v. Dean Witter Organization, Inc., supra, 60 Cal.App.3d at p. 576, 131 Cal.Rptr. 592.) The court stated as part of the justification for its ruling that an attorney's representation of a client is not limited to obtaining access to the courts, but includes settlement efforts, communications urging settlement, and warnings of the alternative of judicial action. (Id. at p. 577, 131 Cal.Rptr. 592.)
In Larmour v. Campanale (1979) 96 Cal.App.3d 566, 568–570, 158 Cal.Rptr. 143, the same theory was employed to hold privileged a demand letter to those appellants from an attorney, who copied the letter to the escrow company that was holding the buyer's deposit in the underlying real estate transaction. The court commented that the escrow company “had a real interest in the developing controversy” (id. at p. 569, 158 Cal.Rptr. 143), so that the attorney's letter informing the parties of his advice to his clients under the circumstances was related to the potential lawsuit in the real estate matter and was accordingly absolutely privileged. (Ibid.)
In Izzi v. Rellas (1980) 104 Cal.App.3d 254, 262, 163 Cal.Rptr. 689, the court interpreted the rule established in Lerette and in a similar case, Pettitt v. Levy (1972) 28 Cal.App.3d 484, 104 Cal.Rptr. 650, as expanding “the working definition of ‘judicial proceedings' to include proceedings which have the real potential for becoming a court concern.” (Izzi v. Rellas, supra, 104 Cal.App.3d at p. 262, 163 Cal.Rptr. 689.) In Izzi a default judgment had been entered, giving rise to a dispute between the attorneys for the parties as to whether court proceedings would be necessary to obtain the vacating of that judgment. Under those circumstances, the court held that the alleged defamation in a demand letter was made in the course of proceedings preliminary to “judicial proceedings.” (Ibid.)7
In the section of the Restatement of Torts referred to by the court in Lerette v. Dean Witter Organization, Inc., supra, 60 Cal.App.3d at page 577, 131 Cal.Rptr. 592, concerning an attorney's privilege to publish defamatory matter, an additional comment is made by the authors: “(e) As to communications preliminary to a proposed judicial proceeding the rule stated in this Section applies only when the communication has some relation to a proceeding that is contemplated in good faith and under serious consideration. The bare possibility that the proceeding might be instituted is not to be used as a cloak to provide immunity for defamation when the possibility is not seriously considered.” (Rest.2d Torts, § 586, com. e, italics added.) 8 It should be noted that the authors of the Restatement did not specify which party to the communications must have some potential litigation under consideration; usually, it would be the speaker of the challenged material whose intentions are involved. Our case does not fit well into that formulation, as this record suggests that when Jasper and Silberman were having their communications with Mother, they anticipated they or their client might be a target of litigation by plaintiff or by the fired business manager Joan West. It also could be inferred that they might have anticipated suing the distributor on the dealership's behalf if it withheld approval of Mother's choice of plaintiff's replacement, Brother. Silberman's declaration in support of summary judgment stated that litigation was “always a realistic possibility” at the time, and eventually the dealership cross-complained against plaintiff for alleged breaches of fiduciary duty.9 Suffice it to say that this record does not yet clearly establish which party might have contemplated litigation, by whom, and when.
Some guidance on the question of potential litigation is provided by this court's opinion in Herzog v. “A” Company, Inc. (1982) 138 Cal.App.3d 656, 660–662, 188 Cal.Rptr. 155. There, we found the privilege of section 47, subdivision (b)(2), as applying to communications made in pursuit of litigation, “applies only to litigation contemplated in good faith.” (Id. at pp. 660–661, 188 Cal.Rptr. 155.) In that case, a plaintiff's claim for damages and other relief against his former employer, based on a letter sent by the former employer to prospective employers threatening litigation in order to prevent him from obtaining employment, was held not barred at the pleading stage by privilege. In holding that the nature of that plaintiff's agreement with his former employer would not support the type of litigation as proposed, we stated: “[A] communication not related to a potential judicial action contemplated for legitimate purposes is not protected by the privilege in section 47, subdivision [b](2).” (Id. at p. 662, 188 Cal.Rptr. 155.) Since the letter exceeded any legitimate purpose, it could not be held privileged. (Ibid.)
From all of this authority, we conclude that factual questions exist in this case as to the application of privilege, if any, in two areas: First, were the defendants' statements made in preparation for any judicial proceeding, and second, did the speakers contemplate any judicial proceedings that were going to be pursued for a legitimate purpose? To explain: This record is murky as to whether, at the time these communications were made by these defendants, any potential lawsuit was actually contemplated by either these defendant professionals, their employer, Mother and/or her dealership, or plaintiff herself. Plaintiff's declaration states she did not contemplate litigation until after she received her notice of termination; however, the letters written by her then attorney, Murfey, before that time clearly warn of impending judicial action, at least against Jasper, if the April 21, 1988 meeting went forward as scheduled. Mother also testified that when plaintiff was asked for her resignation, she told her there would be lawsuits. Did Mother and her advisors expect to initiate any litigation or were they in purely a defensive posture when the communications were made? Is defending against a potential lawsuit the equivalent of anticipating litigation?
Second, if any such litigation were contemplated, particularly by Mother and her advisors, these defendant professionals, was it contemplated for legitimate purposes and thus subject to the protection of privilege? (Herzog v. “A” Company, Inc., supra, 138 Cal.App.3d at pp. 660–662, 188 Cal.Rptr. 155.) The Supreme Court's analysis in Silberg v. Anderson, supra, 50 Cal.3d at pages 216–218, 266 Cal.Rptr. 638, 786 P.2d 365, expressly left open the door for appellate determinations that factual questions may exist about whether the first prong of the Silberg privilege formulation is satisfied, where it is not clear what litigation is expected to take place. Specifically, the Supreme Court cited with approval a portion of the analysis in Fuhrman v. California Satellite Systems (1986) 179 Cal.App.3d 408, 421, 231 Cal.Rptr. 113 (while disapproving another portion of the analysis concerning an “interest of justice” test for privilege). (Silberg v. Anderson, supra, 50 Cal.3d at pp. 217–218, 266 Cal.Rptr. 638, 786 P.2d 365.) The discussion in Fuhrman v. California Satellite Systems, supra, 179 Cal.App.3d at page 421, 231 Cal.Rptr. 113 that was approved in principle dealt with whether the communication under scrutiny there was privileged because the communicator actually intended to follow it up with litigation. The court of appeal in Fuhrman found, relying in part on Herzog v. “A” Company, Inc., supra, 138 Cal.App.3d at page 662, 188 Cal.Rptr. 155, that a factual question existed as to whether the potential lawsuit was actually contemplated, in light of the volume mailing of form letters demanding settlement and threatening litigation to some 8,700 residents who were allegedly “pirating” satellite transmissions. (Fuhrman, supra, at pp. 421–422, 231 Cal.Rptr. 113.) On such facts, the privilege of section 47, subdivision (b)(2) could not be applied as a matter of law.
However, as the court in Herzog v. “A” Company, Inc., supra, 138 Cal.App.3d 656, 188 Cal.Rptr. 155 noted, a defendant would be able to raise the privilege as an affirmative defense at trial, if it could show the letter was “a good faith communication about prospective litigation contemplated for legitimate purposes.” (Id. at p. 662, fn. 5, 188 Cal.Rptr. 155.) This analysis requires trial and determination of the factual issues of (1) whether the defendants made good faith communications about prospective litigation that was contemplated for legitimate purposes, as opposed to promoting their own economic self-interest at plaintiff's expense, and (2) the point at which litigation became contemplated by either side of the dispute.10
According to the first amended complaint, these communications extended from December 1987 through the time of plaintiff's termination on April 22, 1988, but it cannot be determined from the declarations and deposition testimony excerpts submitted exactly at what time these matters had the “real potential for becoming a court concern.” (Izzi v. Rellas, supra, 104 Cal.App.3d at p. 262, 163 Cal.Rptr. 689.) As the authors of the Restatement of Torts commented, “The bare possibility that the proceeding might be instituted is not to be used as a cloak to provide immunity for defamation when the possibility is not seriously considered.” (Rest.2d Torts, § 586, com. e, § 588, com. e.) Our de novo examination of the papers supporting and opposing summary judgment convinces us that there are genuine issues of material fact preventing the issuance of summary judgment in this case, as to the first prong of the Silberg formulation of the applicability of privilege to such communications. (M.B. v. City of San Diego, supra, 233 Cal.App.3d at pp. 703–704, 284 Cal.Rptr. 555.)11
In reaching our conclusion, we find distinguishable a number of cases in which the privilege has been held to apply to prelitigation communications, where either official proceedings were already underway or where the judicial proceeding had already begun and witness testimony or preparatory activity was in dispute. (Block v. Sacramento Clinical Labs, Inc. (1982) 131 Cal.App.3d 386, 390, 182 Cal.Rptr. 438; Rosenthal v. Irell & Manella (1982) 135 Cal.App.3d 121, 126, 185 Cal.Rptr. 92; Carden v. Getzoff (1987) 190 Cal.App.3d 907, 235 Cal.Rptr. 698; Profile Structures, Inc. v. Long Beach Bldg. Material Co. (1986) 181 Cal.App.3d 437, 226 Cal.Rptr. 192; Gootee v. Lightner (1990) 224 Cal.App.3d 587, 274 Cal.Rptr. 697; Albertson v. Raboff (1956) 46 Cal.2d 375, 295 P.2d 405; Howard v. Drapkin (1990) 222 Cal.App.3d 843, 271 Cal.Rptr. 893; Spitler v. Children's Institute International (1992) 11 Cal.App.4th 432, 438–441, 14 Cal.Rptr.2d 197; see Annot., “Libel and Slander: Attorneys' Statements, To Parties Other Than Alleged Defamed Party or Its Agents, In Course of Extrajudicial Investigation or Preparation Relating to Pending or Anticipated Civil Litigation as Privileged,” (1983) 23 A.L.R.4th 932, 936–946.) The policy sought to be furthered by applying the litigation privilege, section 47, subdivision (b)(2), is to preserve freedom of access to the courts without fear of subsequent harassment by derivative tort actions. (Silberg v. Anderson, supra, 50 Cal.3d at p. 213, 266 Cal.Rptr. 638, 786 P.2d 365.) Where it is not yet clear in a lawsuit, such as the one before us, whether the point of imminent access to the court has even been reached or contemplated, whether offensively or defensively, there is no need or justification for the application of such a privilege. These matters remain for a finder of fact.
In the event that it is established by a trier of fact that none of these defendants' communications, as alleged, was made as a preliminary to a proposed judicial proceeding (Lerette v. Dean Witter Organization, Inc., supra 60 Cal.App.3d at pp. 577–578, 131 Cal.Rptr. 592), there will be no basis for the application of the litigation privilege of section 47, subdivision (b)(2). Nor will the court be required to address the issue of whether all these statements were purely communicative and thus privileged, or constituted tortious conduct. (Kimmel v. Goland, supra, 51 Cal.3d at p. 205, 271 Cal.Rptr. 191, 793 P.2d 524.) However, we cannot foresee the results of the reversal we order as explained in part I, ante. Consequently, for the guidance of the trial court, we endeavor to provide some light on the subject of the nature of the defendants' activities here, as communications or conduct. This question arises because plaintiff has alleged with reference to both defendants Silberman and Jasper that it was their tortious conduct which injured her, as opposed to their communications about the financial condition of the dealership under her leadership. (Kimmel v. Goland, supra, 51 Cal.3d at p. 205, 271 Cal.Rptr. 191, 793 P.2d 524.)
Where the gravamen of a complaint is not a communication but a course of conduct, the litigation privilege of section 47, subdivision (b)(2) may not be applied to bar liability. (Pacific Gas & Electric Co. v. Bear Stearns & Co. (1990) 50 Cal.3d 1118, 1132, fn. 12, 270 Cal.Rptr. 1, 791 P.2d 587; White v. Western Title Ins. Co. (1985) 40 Cal.3d 870, 888, 221 Cal.Rptr. 509, 710 P.2d 309.) We shall first set out the rule established by Kimmel v. Goland, supra, 51 Cal.3d 202, 271 Cal.Rptr. 191, 793 P.2d 524 for distinguishing between privileged publications or broadcasts made during the course of judicial proceedings and non-privileged tortious conduct which is undertaken for any purpose. We then discuss plaintiff's various causes of action in the context of this rule.
In Kimmel v. Goland, supra, 51 Cal.3d 202, 271 Cal.Rptr. 191, 793 P.2d 524, the Supreme Court held the privilege of section 47, subdivision (b)(2) did not bar recovery for injuries from tortious conduct, i.e., invasion of privacy through the illegal recording of confidential telephone conversations, which was done for the purpose of gathering evidence to be used in future litigation. The court characterized this illegal recording as a noncommunicative act, or tortious conduct, which was to be distinguished from publications or broadcasts made during the course of judicial proceedings. This distinction was characterized as a threshold issue which must be addressed in determining the applicability of section 47, subdivision (b)(2). (Kimmel, supra, 51 Cal.3d at p. 211, 271 Cal.Rptr. 191, 793 P.2d 524.)
It was held to be significant in both Kimmel v. Goland, supra, 51 Cal.3d 202, 271 Cal.Rptr. 191, 793 P.2d 524, and an earlier Supreme Court case arising on similar facts, Ribas v. Clark (1985) 38 Cal.3d 355, 212 Cal.Rptr. 143, 696 P.2d 637, that “the acts upon which liability was premised were committed in anticipation of litigation but prior to the commencement of any actual judicial proceeding.” (Kimmel, supra, 51 Cal.3d at p. 211, 271 Cal.Rptr. 191, 793 P.2d 524; italics added.) Previous authority allowing the application of the litigation privilege was distinguished as not involving alleged damages for personal injuries that arose from noncommunicative conduct that occurred during a judicial proceeding. (Ibid.) The Supreme Court's opinion thus allowed the parties whose telephone conversations had been recorded to proceed on their cross-complaint for invasion of privacy (Pen.Code, § 630 et seq.), as against both the individual party plaintiffs who had made the tapes and their attorney, who had transcribed them and otherwise participated in recording the calls. (Kimmel, supra, 51 Cal.3d at pp. 207–209, 271 Cal.Rptr. 191, 793 P.2d 524.)
In Kupiec v. American Internat. Adjustment Co. (1991) 235 Cal.App.3d 1326, 1330–1333, 1 Cal.Rptr.2d 371, this court relied on Kimmel v. Goland, supra, 51 Cal.3d 202, 271 Cal.Rptr. 191, 793 P.2d 524, for the proposition that the litigation privilege of section 47, subdivision (b)(2) applies only to communicative acts and does not privilege tortious courses of conduct. (Kupiec v. American Internat. Adjustment Co., supra, 235 Cal.App.3d at p. 1331, 1 Cal.Rptr.2d 371.) We affirmed the trial court's order sustaining without leave to amend a demurrer to Kupiec's complaint, which alleged that an insurance adjuster intentionally interfered with her prospective economic advantage by misrepresenting and concealing its actual knowledge of the whereabouts of a painting that was the subject of Kupiec's claim, and also otherwise delayed resolution of that claim. Kupiec also pled theories of negligence and intentional concealment of evidence and intentional infliction of emotional distress. (Id. at pp. 1330–1331, 1 Cal.Rptr.2d 371.) We concluded the litigation privilege barred all these causes of action “because the communicative acts on which they are based” were privileged. (Id. at p. 1331, 1 Cal.Rptr.2d 371.) It was clear that all the causes of action “were based solely on communicative acts done in a judicial proceeding by litigants, to achieve the object of litigation, and had a logical relation to the action.” (Id. at pp. 1331–1332, 1 Cal.Rptr.2d 371.) We relied on the analysis of Doctors' Co. Ins. Services v. Superior Court (1990) 225 Cal.App.3d 1284, 275 Cal.Rptr. 674 in support of our decision. There, the court held that an insurer's alleged conduct (attempting to conceal the admitted culpability of their insured and misrepresenting that the insured was not at fault in plaintiff's claim) was all communicative conduct and was thus privileged under section 47, subdivision (b)(2). Although those plaintiffs sought to allege claims for intentional interference with prospective economic advantage, intentional spoliation of evidence, and intentional infliction of emotional distress, the court held that “[t]heir claims, however styled, are founded upon the utterance of injurious communications [made] in or in connection with the prior action. [The insurers] cannot be liable without reliance on privileged communications made in the course of a judicial proceeding. [Citations.]” (Doctors' Co. Ins. Services v. Superior Court, supra, 225 Cal.App.3d at p. 1299, 275 Cal.Rptr. 674.)
Thus, in both Kupiec v. American Internat. Adjustment Co., supra, 235 Cal.App.3d 1326, 1 Cal.Rptr.2d 371, and Doctors' Co. Ins. Services v. Superior Court, supra, 225 Cal.App.3d 1284, 275 Cal.Rptr. 674, it was held that the litigation privilege of section 47, subdivision (b)(2) barred claims that were based on alleged acts that were communicative in nature, where there was no allegation of physical destruction of evidence; claimed misstatements designed to delay a prior lawsuit and to avoid liability were held to be privileged. The gravamen of both those complaints was apparently a series of communications rather than a course of conduct. (Pacific Gas & Electric Co. v. Bear Stearns & Co., supra, 50 Cal.3d at p. 1132, fn. 12, 270 Cal.Rptr. 1, 791 P.2d 587.) As the Supreme Court there pointed out, further contrasting communications and conduct, while “an exhortation to sue might be privileged, financing and otherwise promoting the litigation would not be.” (Ibid.) Kimmel v. Goland, supra, 51 Cal.3d 202, 271 Cal.Rptr. 191, 793 P.2d 524 is in agreement with this point, as the Supreme Court noted: “[O]ur holding that the litigation privilege does not apply is limited to the injur[ies] resulting from [the plaintiffs' and their attorney's] conduct. To the extent the complaint rests on [the attorney's] alleged communicative act of ‘counseling’ and ‘advising’ his clients, the privilege is clearly operative. [Citation.]” (Id. at p. 208, fn. 6, 271 Cal.Rptr. 191, 793 P.2d 524.)
Guided by this authority, our inquiry should be whether conduct or communication predominates in plaintiff's various causes of action as pled. A commentator has colorfully outlined the appropriate inquiry: Are the defendant's acts properly characterized as “conduct falling outside the force field energized by the privilege”? (Naeve, Limits on Litigation Privilege Could Portend Wider Liability, L.A. Daily Journal (Aug. 28, 1992) p. 7, cols. 1–3.)
We thus turn to an examination of plaintiff's various causes of action in her first amended complaint. First, taking the combined allegations of intentional interference with prospective economic advantage and with contractual relations, it is well established that the litigation privilege of section 47, subdivision (b)(2) applies in a proper case to this type of cause of action (Silberg v. Anderson, supra, 50 Cal.3d at p. 215, 266 Cal.Rptr. 638, 786 P.2d 365; accordingly, a related conspiracy claim would also be covered: Pettitt v. Levy, supra, 28 Cal.App.3d at p. 491, 104 Cal.Rptr. 650.) We have already discussed above (pt. I, ante ) whether the alleged conduct and communications were made in connection with or anticipation of judicial proceedings, and concluded this issue is a triable one. Regardless of the outcome of that inquiry, however, triable issues also remain on whether Silberman's and Jasper's dealings with their client, Mother, as they affected plaintiff, were predominantly communicative in nature, or were predominantly tortious conduct designed to injure plaintiff before any litigation was actually contemplated or underway, by interfering with her economic advantage and her contractual relations.
An additional wrinkle in this conduct/communication dichotomy appears by way of plaintiff's allegations that Silberman's and Jasper's conduct was carried out for their own economic interests, to preserve their positions in the dealership's business structure. That is, even if it is found that Silberman's and Jasper's communications to their client were made in a judicial proceeding, by litigants or participants (witnesses or attorneys), the last prongs of the litigation privilege formulation, as identified and combined in Silberg v. Anderson, supra, 50 Cal.3d at pages 219–220, 266 Cal.Rptr. 638, 786 P.2d 365, may be subject to dispute: i.e., were these communications made to achieve the objects of the litigation, having some connection or logical relation to the action? (Ibid.) Do they fall within the force field energized by the privilege? Plaintiff alleges not. This question cannot be determined at this time and awaits further proceedings on the claims for interference with prospective advantage and contractual relations as well as conspiracy.
Turning to plaintiff's next theory of liability against Silberman and Jasper, she alleges a combined claim for negligent interference with prospective economic advantage and professional malpractice. The malpractice claim is based both on allegations that she was a direct client of these defendants, and that she was a third party beneficiary of their professional relationship with her parents and their business, and the family trust entities. (Biakanja v. Irving (1958) 49 Cal.2d 647, 320 P.2d 16.) Plaintiff is alleging that attorney Jasper's advice to Mother and the dealership adversely affected plaintiff, and was closely connected to her termination. She also alleges that Silberman acted in bad faith by misrepresenting the true financial condition of the dealership in order to adversely affect plaintiff's standing there. Particular conduct approved by Jasper and acquiesced in by Silberman at the time of plaintiff's constructive termination is alleged: changing the locks to plaintiff's office, firing her primary management staff members, and then drafting her termination notice without giving reasons.
The court in Block v. Sacramento Clinical Labs, Inc., supra, 131 Cal.App.3d 386, 392–394, 182 Cal.Rptr. 438, analyzed the applicability of the litigation privilege to professional malpractice claims, and found that where the gravamen of the action was alleged negligent publication of an allegedly negligently prepared report by a professional (there, a coroner) in connection with the district attorney's investigation of possible criminal charges, the privilege barred plaintiff from pursuing the action against the professional. All the actions taken there that were sued upon were performed in preparation for litigation. (Ibid.) Here, plaintiff alleges some or all of these professional defendants' actions which adversely affected her were pursued for their private advantage, and constituted breaches of duties owed either directly to plaintiff or of which she was an intended beneficiary. (Biakanja v. Irving, supra, 49 Cal.2d 647, 320 P.2d 16.) Under the reasoning of Herzog v. “A” Company, Inc., supra, 138 Cal.App.3d 656, 188 Cal.Rptr. 155, it is for the trier of fact to inquire whether this alleged conduct was actually limited to communications that were made in good faith on behalf of the client, regarding litigation that was contemplated or anticipated in good faith. Conversely, was the alleged conduct a breach of duties owed directly or indirectly to plaintiff, carried out in pursuit of the defendants' own economic advantage? Within plaintiff's various allegations may be some germ of conduct that is separate from any communications that may have been made in anticipation of litigation; however, these matters cannot be determined on this record, and triable issues remain on that point.
The issues are much simpler with regard to plaintiff's claims of slander per se. We believe it is evident that only communicative acts are alleged in this regard, and that no question of the conduct/communications dichotomy need be considered here. In contrast to Kimmel v. Goland, supra, 51 Cal.3d 202, 271 Cal.Rptr. 191, 793 P.2d 524, where the act of taping telephone conversations was clearly conduct, in this case the act of communicating allegedly slanderous statements is clearly communicative. The remainder of plaintiff's causes of action, however, seem to fall somewhere between these two poles, and we leave the resolution of these issues to the trial court.12
In conclusion, we shall briefly address the two discovery issues plaintiff has raised on this appeal; these affect only Jasper. First, we may review the order denying plaintiff's motion to compel responses to requests for production of documents as part of the judgment on review. (In re Marriage of Economou (1990) 224 Cal.App.3d 1466, 1474–1476, 274 Cal.Rptr. 473; see 9 Witkin, Cal.Procedure (3d ed. 1985) Appeal, § 86, pp. 107–108.) Plaintiff sought documents in three separate categories: (1) Notes of Jasper's partner, Eric Weitzen, regarding his representation of her; (2) documents relating to Jasper and his firm's representation of her father, particularly with respect to creating the family trust; and (3) billing records to plaintiff's father from Jasper's law firm. With respect to the first category, Weitzen's notes concerning his representation of plaintiff: Under Code of Civil Procedure section 2018, no work product privilege exists which would forbid disclosure of the notes if the work product is relevant to an issue of breach by the attorney of a duty arising out of the attorney-client relationship. In her fourth cause of action for professional malpractice, plaintiff has alleged such a breach of duty against the firm of which Weitzen is a partner, and it follows that the documents requested would be discoverable, on renewal of plaintiff's motion, subject to in camera inspection to select only those documents concerning plaintiff herself as a law firm client. (Code Civ.Proc., § 2018, subd. (f); Weil & Brown, Cal.Practice Guide: Civil Procedure Before Trial (Rutter 1992) § 8:231, p. 8C–34.6.)
However, in all three categories of the requested documents, it appears that plaintiff has sought documents based on her theory that she is a third party beneficiary of the attorney-client relationship between her father and Jasper's firm. The trial court's order denying the motion to compel stated as a reason for the denial of the material concerning plaintiff's father's conversations with attorneys and his billing records that the administrator of the father's estate had yet to be dismissed. In the briefs, plaintiff argues that the estate has been distributed and any attorney-client privilege between the law firm and her father was therefore terminated. She also contends that Evidence Code sections 959, 960, and 961 (dealing with the attorney-attesting witness exception to attorney-client privilege, particularly with respect to intentions expressed in a document) apply as exceptions to any asserted attorney-client privilege.
In light of the incomplete state of this record on the status of plaintiff's father's estate, and because plaintiff has not made an adequate showing of her entitlement to such documents on her third party beneficiary theory, we decline to decide the additional discovery issues presented and instead return the matter to the trial court for further proceedings, if plaintiff duly renews her discovery motion, including any in camera inspection that may be necessary to ascertain relevancy of the requested documents to this litigation.
In closing, we are required to address the issue of whether the trial court was justified in awarding $2,000 monetary sanctions against plaintiff in favor of Jasper in connection with plaintiff's order to show cause to compel Jasper to answer deposition questions regarding his representation of plaintiff's father. This order is reviewable on appeal from the judgment subsequently issued. (Code Civ.Proc., § 906; Ghanooni v. Super Shuttle (1992) 2 Cal.App.4th 380, 383–384, 3 Cal.Rptr.2d 43.)
Insofar as the order was based on Code of Civil Procedure section 128.5, Jasper essentially concedes that it is inadequate because it does not make a finding of bad faith to justify the sanctions awarded. (Llamas v. Diaz (1990) 218 Cal.App.3d 1043, 1047, 267 Cal.Rptr. 427.) However, the basis of the sanctions request was the failure of plaintiff's counsel to notify defendant that the noticed order to show cause had been taken off calendar before the hearing, thus requiring Jasper to incur attorney's fees for an unnecessary hearing appearance. There is an adequate basis for this award of sanctions in the record and in Code of Civil Procedure sections 2023 and 2031, allowing an award of sanctions against a party who does not demonstrate that she acted with substantial justification in bringing the order to show cause on this discovery matter. No more specific findings are required for a discovery sanction. (Mattco Forge, Inc. v. Arthur Young & Co. (1990) 223 Cal.App.3d 1429, 1437–1438, 273 Cal.Rptr. 262.) We uphold the interim order awarding monetary sanctions, despite our reversal of the summary judgments.
The order awarding monetary sanctions is affirmed. The summary judgments and underlying order denying the motion to compel production of documents are reversed, with directions to the trial court to entertain such further proceedings as may be appropriate, subject to plaintiff's renewal, if any, of her motion to compel production of documents. Each party is to bear his or her own costs.
FN1. All statutory references are to the Civil Code unless otherwise specified. Since the time of the events giving rise to this litigation, section 47 has been amended to add lettered subdivisions; we will use the current designation in this opinion.. FN1. All statutory references are to the Civil Code unless otherwise specified. Since the time of the events giving rise to this litigation, section 47 has been amended to add lettered subdivisions; we will use the current designation in this opinion.
2. The underlying action was known as Lorelei Trenfel v. Tara Motors dba Toyota of El Cajon (Super.Ct. San Diego County, 1988, No. 599612). In addition to suing Mother and her dealership, plaintiff named her brother and replacement as general manager, William Trenfel, as a defendant. That lawsuit was subsequently settled.
3. The remaining elements of the Silberg test for the application of the litigation privilege are whether the communication was made: “(2) by litigants or other participants authorized by law; (3) to achieve the objects of the litigation; and (4) that [has] some connection or logical relation to the action. [Citations.]” (Silberg v. Anderson, supra, 50 Cal.3d at p. 212, 266 Cal.Rptr. 638, 786 P.2d 365.)
4. Apparently the consent of the distributor to replace plaintiff with Brother was never obtained. However, in this lawsuit, we are concerned only with the events leading up to the filing of the lawsuit, not collateral matters.
5. As noted above, the summary judgment papers reveal that this wrongful termination lawsuit was settled, and part of the settlement involved the funding of one of the family trusts, for the benefit of plaintiff.
6. Previously, plaintiff's motion to compel production of documents by Jasper and his firm was denied, as will be discussed in part III, post. Monetary sanctions of $2,000 were assessed against plaintiff in favor of Jasper on a related discovery matter (also discussed post ).
7. In Pettitt v. Levy, supra, 28 Cal.App.3d at pages 488–491, 104 Cal.Rptr. 650, the Court of Appeal found the litigation privilege barred prosecution of a complaint alleging the defendants prepared and submitted a false or forged building permit to city officials. At oral argument, counsel for Silberman in particular placed great weight upon this authority in support of the application of the privilege here; the theory advanced was that even such fraudulent activity should be considered privileged because it has a logical connection to the subject litigation (and thus meets the third and fourth prongs of the Silberg formulation of the privilege; see fn. 3, ante.) This argument is not well taken, however, because at this stage, this litigation is still focused upon the first part of the Silberg test, i.e., were the statements made in judicial or quasi-judicial proceedings? (Silberg v. Anderson, supra, 50 Cal.3d at p. 212, 266 Cal.Rptr. 638, 786 P.2d 365.) Moreover, although the Supreme Court in Kimmel v. Goland, supra, 51 Cal.3d at pages 209, 212, 271 Cal.Rptr. 191, 793 P.2d 524 cited Pettitt v. Levy, supra, 28 Cal.App.3d 484, 104 Cal.Rptr. 650, without disapproving it, it is possible that the conduct discussed in Pettitt, forging a document, might be viewed post-Kimmel as unprotected tortious conduct rather than protected prelitigation preparation. We need not decide that issue here, however.
8. The same language is used in a Restatement comment pertaining to the similar privilege for witnesses in judicial proceedings. (Rest.2d Torts, § 588, com. e.)
9. At oral argument, counsel for Jasper claimed that a potential additional source of contemplated litigation under these circumstances was an investigation by the Department of Motor Vehicles and the district attorney of the sale of used vehicles as new by the dealership while it was under plaintiff's leadership, resulting in notice in November 1988 (after plaintiff's termination) that a civil action would be filed against the dealership. The source of this information is Mother's further responses to interrogatories, found in our record in connection with a proceeding on plaintiff's petition to name attorney Jasper as a party defendant, held well before these summary judgment proceedings. (§ 1714.10.) This information is peripheral to the main disputes at summary judgment and in fact only serves to clarify that uncertainties exist in this record as to what litigation was contemplated and when, making application of the privilege at this stage impossible.
10. Because of the uncertainties apparent on this record, we are somewhat startled at the vehemence of both defendants' counsel at oral argument in claiming broad protection of privilege for virtually any activity of attorney or accountant in advising a client; the presupposition seems to be that any investigation and eventual termination of an employee, particularly a management employee, will of necessity lead to litigation in today's business climate. Counsel also suggested that any such advisory conduct, even if defamatory, would have to be privileged if it had some logical relation to some proposed litigation (Silberg v. Anderson, supra, 50 Cal.3d at p. 212, 266 Cal.Rptr. 638, 786 P.2d 365.) This approach begs the question with which we are presented: were these alleged communications made in anticipation of judicial proceedings? If not, one never need ask if any “logical relation” to some particular action is present. Moreover, any application of the litigation privilege must be tied to achieving its main purpose: preserving freedom of access to the courts without fear of subsequent derivative tort actions. (Id. at p. 213, 266 Cal.Rptr. 638, 786 P.2d 365.) To presume access to the courts is needed in every conceivable situation where professional advice is given is too broad an interpretation of the privilege.
11. The federal authority cited with approval in Lerette v. Dean Witter Organization, Inc., supra, 60 Cal.App.3d at page 577, 131 Cal.Rptr. 592 (i.e., Johnston v. Cartwright (8th Cir.1966) 355 F.2d 32, 37 [“applying similar Iowa privilege to communication of lawyer prior to commencement of lawsuit but where ‘[a]ll signs pointed to incipient litigation and to a necessity for protective action’ ”] ) is not to the contrary. There, the court of appeal was upholding a factual determination of the district court that a lawsuit against the attorney's client was probable, and the comments of the attorney were thus made in connection with possible litigation.
12. Jasper responds to plaintiff's allegations of professional malpractice with regard to the preparation of the family trust by stating that since Mother is still alive, any recourse plaintiff may have in connection with the family trust should be limited to an appeal to Mother, not this court. However, a more recently filed brief by Silberman states that Mother is now deceased. Moreover, the summary judgment papers filed by Jasper state that some of the trust issues were resolved as part of the settlement in the underlying litigation. We cannot purport to resolve these factual developments on this record and expressly leave the scope of the malpractice claim for the trial court's resolution.
HUFFMAN, Associate Justice.
KREMER, P.J., and WORK, J., concur.