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Oasis West Realty, LLC v. Kenneth A. Goldman et al., No. S181781 (Cal. May 16, 2011)

Factual and Procedural Background

Oasis West Realty, LLC (Oasis) retained attorney Kenneth A. Goldman and his firm Reed Smith in January 2004 to obtain Beverly Hills City Council approval for a redevelopment ("Hilton") project. Goldman and Reed Smith ceased representing Oasis in April 2006. In 2008 Goldman publicly opposed the same project, soliciting signatures for a referendum to overturn the council's approval. Oasis sued Goldman and Reed Smith on January 30, 2009 for breach of fiduciary duty, professional negligence, and breach of contract, seeking damages in excess of $4 million. Defendants filed an anti-SLAPP special motion to strike under Code Civ. Proc. § 425.16 on March 9, 2009. The trial court denied the motion, finding the gravamen of Oasis's claims was breach of duties of loyalty and confidentiality rather than protected petitioning activity. The Court of Appeal reversed, holding the claims arose from protected petitioning activity and that Oasis lacked a probability of prevailing. The Supreme Court reversed the Court of Appeal, concluding Oasis demonstrated a probability of prevailing on its claims.

Legal Issues Presented

  1. Whether Oasis's causes of action "arise from" defendants' protected petitioning or free speech activity for purposes of the anti-SLAPP statute (Code Civ. Proc. § 425.16).
  2. Whether Oasis has demonstrated a probability of prevailing on its claims (the second prong of the anti-SLAPP analysis).
  3. Whether an attorney may, after terminating representation, publicly oppose a former client's interest in the same matter where the attorney acquired confidential information during the prior representation, and whether constitutional speech protections bar liability in such circumstances.

Arguments of the Parties

Plaintiff / Respondent (Oasis West Realty)

  • Goldman owed duties of loyalty and confidentiality as Oasis's former counsel which continued after termination of the representation.
  • Goldman acquired confidential and sensitive information during representation and then used that information to oppose the same project he had been retained to secure approval for, thereby breaching fiduciary duty, committing professional negligence, and breaching contract.
  • Oasis incurred over $3,000 in legal fees investigating and demanding that defendants cease adverse activities; those fees are recoverable damages.

Defendants / Appellants (Goldman and Reed Smith)

  • Their petitioning and speech in connection with a public issue (soliciting referendum signatures, speaking at council meeting) are protected activity under the anti-SLAPP statute.
  • The rule in Wutchumna Water Co. v. Bailey should be limited to (a) subsequent or concurrent representations adverse to a former client or (b) actual disclosure of confidential information; it should not bar an attorney from acting on his own behalf after representation ends.
  • Restatement Third § 125 and related authorities allow lawyers to take public positions on issues; the First Amendment protects such speech and precludes imposing liability here.
  • Cited Johnston v. Koppes and other authorities to argue speech protections apply and the conduct did not give rise to viable claims.
  • Warned against a broad categorical bar on attorney speech and practical consequences such a rule would create.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 57 Explains SLAPP acronym and legislative purpose of § 425.16. Used as background to describe anti-SLAPP statutory scheme.
Wutchumna Water Co. v. Bailey (1932) 216 Cal. 564, 573-574 States attorney forbidden after severing relationship to injure former client or use confidences acquired in representation. Applied as foundational authority that duties of loyalty and confidentiality continue after representation and bar using confidences to the former client's detriment.
City of Cotati v. Cashman (2002) 29 Cal.4th 69, 76 Sets out two-step anti-SLAPP analysis (threshold showing + plaintiff's probability of prevailing). Framed the procedural framework for resolving the anti-SLAPP motion; Court proceeded to the second prong.
Navellier v. Sletten (2002) 29 Cal.4th 82, 89, 95 Explains that a cause of action must satisfy both prongs to be a SLAPP; discusses threshold requirements. Quoted to emphasize that only causes lacking minimal merit should be stricken; supported review approach.
Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 269 Standard of review (de novo) and how to evaluate evidence on anti-SLAPP motions (accept plaintiff's evidence as true). Applied to explain review standard and evidentiary approach in determining probability of prevailing.
Wilson v. Parker, Covert Chidester (2002) 28 Cal.4th 811, 821 Plaintiff must "state and substantiate a legally sufficient claim" to defeat anti-SLAPP motion. Used to state the plaintiff's burden on the second prong.
Shopoff Cavallo LLP v. Hyon (2008) 167 Cal.App.4th 1489, 1509 Elements of breach of fiduciary duty. Court cited elements to evaluate Oasis's fiduciary duty claim.
Reichert v. General Ins. Co. (1968) 68 Cal.2d 822, 830 Elements of breach of contract action. Used to outline contract elements relevant to Oasis's claim.
People ex rel. Dept. of Corporations v. SpeeDee Oil Change Systems, Inc. (1999) 20 Cal.4th 1135, 1146-1147 Attorney-client relationship depends on client's trust; courts protect legitimate expectations of loyalty. Quoted to support the proposition that fiduciary duties underpin attorney-client trust and merit protection.
People ex rel. Deukmejian v. Brown (1981) 29 Cal.3d 150, 155-156 States the Wutchumna rule and notes presumption that confidences were disclosed arises from attorney-client relationship. Relied on to support inference that confidences likely were acquired and could have been used.
Brand v. 20th Century Ins. Co./21st Century Ins. Co. (2004) 124 Cal.App.4th 594, 602 Reiterates duty principles from Wutchumna. Cited as consistent authority on post-representation duties.
Restatement (Third) of the Law Governing Lawyers, § 60 (and § 125) Restatement rule that lawyer may not use or disclose confidential client information if reasonably likely to harm client; §125 discusses public positions but notes confidentiality limits. Court cited Restatement to show both use and disclosure of confidences are prohibited and to reject defendants' reliance on §125 as authorizing the alleged conduct.
Santa Clara County Counsel Attys. Assn. v. Woodside (1994) 7 Cal.4th 525 Public-sector attorneys suing employer do not violate duty of loyalty where no conflict with matters they represented the county on. Distinguished: court explained Woodside is not analogous because it did not involve opposition on the same matters previously represented.
Drum v. Bleau, Fox Associates (2003) 107 Cal.App.4th 1009, 1021 On anti-SLAPP motions, plaintiff may rely on inferences if proffered evidence supports them. Applied to justify inferring use of confidential information from the sequence of events and undisputed facts.
Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1065 Referenced regarding Drum's treatment (Drum disapproved on another ground in Rusheen). Noted as background authority in discussing inference standards.
Jordache Enterprises, Inc. v. Brobeck, Phleger Harrison (1998) 18 Cal.4th 739, 751 Attorney fees incurred as a direct result of another's tort are recoverable damages. Applied to hold Oasis's remediation fees (over $3,000) are recoverable as damages.
Gentile v. State Bar of Nevada (1991) 501 U.S. 1030 (conc. opn. of O'Connor, J.) Lawyers may be subject to ethical precepts limiting speech otherwise constitutionally protected. Quoted to support that ethical duties may limit attorneys' speech rights.
American Motors Corp. v. Hujfstutler (1991) 61 Ohio St.3d 343, 575 N.E.2d 116, 120 There is no constitutional bar to injunction against unlawful use of confidential business information. Cited to support that First Amendment does not protect unlawful use of confidential information.
Johnston v. Koppes (9th Cir. 1988) 850 F.2d 594 Discusses limits of loyalty when lawyer exercises convictions; factual background concerned employment actions absent specific ongoing matter or disclosure. Cited by Court of Appeal for defense; Supreme Court found Johnston inapposite because it did not involve use of confidences or opposition on same specific matter previously represented.
O'Brien v. Jones (2000) 23 Cal.4th 40, 57 Recognition of this court's inherent, primary authority over the practice of law. Cited by majority as a basis for addressing the second anti-SLAPP prong directly in this case.
Flatley v. Mauro (2006) 39 Cal.4th 299, 311-320 Defendant need only show a legitimate issue whether speech is constitutionally protected to trigger anti-SLAPP threshold. Quoted in concurrence to explain threshold showing requirement; majority discussed related First Amendment points.
Fox Searchlight Pictures, Inc. v. Paladino (2001) 89 Cal.App.4th 294, 305 Explains that requiring defendant to prove speech is constitutionally protected would render plaintiff's burden superfluous. Quoted in concurrence discussing scope of anti-SLAPP threshold inquiry.
Mann v. Quality Old Time Service, Inc. (2004) 120 Cal.App.4th 90, 106 If plaintiff shows probability of prevailing on any part of claim, the entire cause of action has some merit. Applied to explain that Oasis need only show probability of prevailing on any part of its claims to defeat the anti-SLAPP motion.

Court's Reasoning and Analysis

The Court framed the anti-SLAPP inquiry as two-pronged but, invoking its supervisory role over the practice of law, proceeded directly to the second prong because it concluded Oasis had demonstrated a probability of prevailing. The Court summarized the elements of the three causes of action (breach of fiduciary duty; professional negligence; breach of contract) and focused on Oasis's core theory: Goldman, as fiduciary, acquired confidential information during the representation and later actively opposed the same project, creating reasonable inferences that he used that information to Oasis's detriment. The Court accepted Oasis's evidentiary showing and the permissible inferences therefrom (per Soukup, Wilson, Drum), concluding that direct evidence of use of confidences is not required at the anti-SLAPP stage where the plaintiff proffers sufficient evidence to infer such use.

The Court rejected defendants' proposed narrowing of the Wutchumna rule to situations of concurrent/successive adverse representation or actual disclosure, explaining that both use and disclosure of confidences can harm a former client and are prohibited. It distinguished Santa Clara County Counsel Attys. Assn. v. Woodside as inapposite, refused defendants' reliance on Restatement §125 to permit the alleged conduct, and found Johnston v. Koppes unhelpful because it did not involve opposition on the same represented matter or use of confidences. The Court also rejected the First Amendment defense as inapplicable to the duplicity alleged (using confidences to oppose a former client), and held that Oasis had made a prima facie showing of actual injury in the form of reasonable attorney fees incurred to investigate and demand cessation of the conduct (Jordache).

Holding and Implications

Holding: The judgment of the Court of Appeal is reversed.

Implications: The Supreme Court held Oasis demonstrated a probability of prevailing on claims for breach of fiduciary duty, professional negligence, and breach of contract arising from alleged use of a former client's confidential information to oppose the very matter on which the attorney had represented the client. As a direct effect, Oasis's causes of action survive the anti-SLAPP special motion to strike. The Court emphasized it was not announcing a broad categorical bar on attorney speech; rather, use (or misuse) of a former client's confidential information to the client's detriment can support liability and is not protected by the First Amendment under the circumstances alleged.

Disposition

The judgment of the Court of Appeal is reversed.

OASIS WEST REALTY, LLC, Plaintiff and Respondent, v. KENNETH A. GOLDMANet al., Defendants and Appellants.

OPINION

BAXTER, J.

In 2004, defendant Attorney Kenneth A. Goldman agreed to represent plaintiff Oasis West Realty, LLC (Oasis), in its effort to obtain approval of a redevelopment project from the Beverly Hills City Council. Goldman terminated the representation about two years later. In 2008, Goldman became involved in a campaign to thwart the same redevelopment project by soliciting signatures on a referendum petition to overturn the Beverly Hills City Council's approval of the project. Shortly after the voters upheld the city council's approval by a very narrow margin, Oasis filed a complaint for breach of fiduciary duty, professional negligence, and breach of contract against Goldman and his law firm, Reed Smith, LLP.

Defendants filed a special motion to strike the complaint under the anti-SLAPP statute, contending that all of Oasis's causes of action arose from Goldman's acts "in furtherance of [his] right of petition or free speech . . . in connection with a public issue." (§ 425.16, subd. (b)(1).) The trial court held that the anti-SLAPP statute did not apply, in that the gravamen of the causes of action was not Goldman's petitioning activity but his breach of the duties of loyalty and confidentiality, and denied the motion without considering whether Oasis had demonstrated a probability of prevailing on its claims. The Court of Appeal reversed, finding both that Oasis's claims arose from protected activity and that Oasis had failed to demonstrate a probability of prevailing on them. Even though the court found, and the parties agreed, that Goldman had acted adversely to his former client with respect to an ongoing matter that was the precise subject of the prior representation, the court declared that there is "no authority for a rule which would bar an attorney from doing what Goldman did here."

SLAPP is an acronym for "strategic lawsuit against public participation." ( Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 57 [ 124 Cal.Rptr.2d 507, 52 P.3d 685].) In 1992, the Legislature, finding there had been "a disturbing increase in lawsuits brought primarily to chill the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances" (Code Civ. Proc., § 425.16, subd. (a)), enacted Code of Civil Procedure section 425.16 (hereafter section 425.16) to provide a remedy against such lawsuits.

We disagree. As demonstrated below, we conclude that Oasis has stated and substantiated the sufficiency of its legal claims against its former attorneys.

BACKGROUND

In early 2004, plaintiff Oasis embarked on a plan to redevelop and revitalize a nine-acre parcel it owned in Beverly Hills by erecting a five-star hotel and luxury condominiums. A Hilton hotel was already on the property, and the project is often referred to as the Hilton project. The Hilton project required the approval of the Beverly Hills City Council.

On January 26, 2004, Oasis retained defendant Attorney Kenneth A. Goldman (Goldman) and his law firm, defendant Reed Smith, LLP (Reed Smith), to provide legal service; in connection with the Hilton project. According to the engagement letter, Goldman was to "have overall responsibility for this matter." Oasis has alleged that it hired Goldman "because, among other things, he was an attorney reputed to be an expert in civic matters and a well-respected, influential leader who was extremely active in Beverly Hills politics." Oasis said it believed that "Goldman's statements and opinions on City development natters bore significant influence on City Council members and the local citizenry," particularly on members of the Southwest Homeowners Association, of which he was the president.

During the representation, Goldman became "intimately involved in the formulation of the plan for Oasis'[s] development of the Property, its overall strategy to secure all necessary approvals and entitlements from the City and its efforts to obtain public support for the Project. Mr. Goldman was a key Oasis representative in dealing with Beverly Hills City Officials, including the Planning Commission and City Council. Throughout the representation, Oasis revealed confidences to Mr. Goldman, which it reasonably believed would remain forever inviolate." Reed Smith, in turn, received about $60,000 in fees. In April 2006, Goldman advised Oasis that he and Reed Smith would no longer represent Oasis in connection with the Hilton project.

Oasis's development proposal was presented to the city council in June 2006, after the representation hac. ended. For the next two years, the council and the city's planning commission reviewed thousands of pages of technical studies, held over 18 hearings, and received input from hundreds of community members. In April 2008, the council certified the environmental impact report and adopted a General Plan Amendment Resolution and the Beverly Hilton Specific Plan Resolution with Conditions of Approval, which paved the way for final approval of the Hilton project.

Shortly thereafter, a group of Beverly Hills residents opposed to the general plan amendment formed the Citizens Right to Decide Committee, with the goal of putting a referendum on the ballot that would allow voters to overturn the city council's approval of the Hilton project. It was at this point that Goldman engaged in the conduct that is of concern in this proceeding.

According to the complaint, Goldman "lent his support" to the group opposing the Hilton project; "campaigned for and solicited signatures for a Petition circulated by said citizen's group that sought to abrogate the City Council's approval of the Project and instead place approval in the hands of the citizenry by proposition vote on November 4, 2008 (Measure `H')"; and "distributed a letter seeking to cause residents of Beverly Hills to sign the Petition for the purpose of placing a referendum on the ballot, asking Beverly Hills voters to overturn approval of the Project." In a declaration filed in support of the special motion to strike, Goldman confirmed that on or about May 12, 2008, the day the city council provided final approval to the Hilton project, he and his wife walked their street to solicit signatures for the petition to overturn the council's decision. Goldman estimated that they spoke to 10 neighbors and collected five or six signatures over a period of less than an hour and a half, and that he left a note at four or five homes where there was no response. Goldman estimated that through the couple's joint effort on May 12 as well as additional work by his wife, they managed to collect approximately 20 signatures. Goldman insisted that he at no time disclosed confidential information acquired during the representation of Oasis to anyone, and did not believe that he disclosed to anyone that he had ever represented Oasis in connection with the Hilton project.

The note read as follows:

Goldman also attended a city councel meeting on May 6, 2008, to oppose enforcement, unsuccessfully, of the requirement that persons soliciting signatures for a referendum petition carry the full text of the resolution, including voluminous documents that had been incorporated therein. Goldman's remarks, in full, were as follows: "Good evening members of the Council. I am here to speak on a very narrow issue concerning the Hilton that has been discussed and alluded to tonight. It is hard for me to believe that anyone in this Chamber would view it as being fair, whether you're for the Hilton or for the Referendum, to have to carry around 15 1/2 pounds of material from home to home to home to home, whether you're 15 years old or 85 years old. It's never been done. [¶] We all know it's not necessary to inform anybody to whom a petition is being presented. They don't need to read the entire EIR, the entire draft EIR, never been done. I dare say 99 percent of the people in this room, whether they are for the Hilton or whether they are against the Hilton, none of them have read the entire EIR and DEIR. It's just not necessary. You can take the executive summary, you can take the resolution. [¶] I know every single one of you. I know every single one of you is fair and right and I cannot believe that you would think it is fair and right, whether you're for it or against it, to have someone, to require someone to carry that kind of material around with them when they are trying to seek whatever they are trying to seek. We've never done this before in this city, we shouldn't do it now. It's jus:, not right; again, whether you're for the Hilton or for the Referendum. Don't require it, because it's not fair and each of the five of you knows that. It's not right. It's not necessary to inform the citizenry. There's a lot of material there. Nobody is going to read through that. Nobody that's spoken tonight, I guarantee you, I haven't read through that. Thank you."

In a letter to Reed Smith dated May 14, 2008, Oasis criticized Goldman's conduct as a "manifest violation of both his and your firm's fiduciary obligations as our prior counsel' and demanded that Goldman and Reed Smith "immediately and unconditionally terminate and withdraw from any and all activities that may in any manner be construed as adverse to the Project, its approval or Oasis'[s] interests." Reed Smith responded by letter the same day that pending its review of these allegations, Goldman and the firm had agreed not to "engage in any actions concerning the referendum petition that is being circulated." In a letter sent the next day, Oasis insisted that "remedial action" be taken immediately to minimize further damage and proposed that Goldman and his wife ("as mutual agents of the other") "retract the letter and their support for the petition and referendum."

The citizens' committee collected the necessary signatures to place the proposed general plan amendment on the ballot as Measure H. Measure H, which ratified the city council's decision, was passed by voters on November 2, 2008, by a margin of 129 votes.

On January 30, 2009, Oasis filed the pending lawsuit against Goldman and Reed Smith for breach of fiduciary duty, professional negligence, and breach of contract, seeking damages in excess of $4 million. Defendants filed a special motion to strike under section 425.16 on March 9, 2009. The trial court denied the special motion to strike, finding that the anti-SLAPP statute did not apply. The trial court determined that the "gravamen" of this action was Goldman's breach of his duty of loyalty and confidentiality as well as his duty to disclose adverse interests at the outset of the representation, not his solicitation of signatures for the referendum petition or speaking at the city council meeting. Because defendants had failed to make a threshold showing that the causes of action arose from protected activity, the trial court found no need to address the second step of the anti-SLAPP inquiry — i.e., whether Oasis had established a probability of prevailing at trial.

The Court of Appeal reversed in a published opinion. The court acknowledged our oft-quoted warning in Wutchumna Water Co. v. Bailey (1932) 216 Cal. 564, 573-574 [ 15 P.2d 505] — that "an attorney is forbidden to do either of two things after severing his relationship with a former client. He may not do anything which will injuriously affect his former client in any manner in which he formerly represented him nor may he at any time use against his former client knowledge or information acquired by virtue of the previous relationship" — but decided that such a "sweeping statement" applied only "in the context of subsequent representations or employment" and did not govern "the acts an attorney takes on his or her own behalf." Although Goldman "unquestionably acted against the interest of his former client, on the issue on which he was retained," the Court of Appeal found that Oasis had not stated a claim for breach of duty or violation of professional ethics, inasmuch as Goldman had not undertaken a "second attorney-client relationship or second employment of any kind" with an adverse interest, was no longer representing Oasis as a current client, and had not disclosed confidential information acquired during the representation. Based on the foregoing, the court deduced that the challenged causes of action must therefore have arisen from protected conduct, concluded further that Oasis had failed to establish a probability of prevailing on its claims, and reversed the order denying defendants' anti-SLAPP motion.

DISCUSSION

Section 425.16, subdivision (b)(1), provides: "A cause of action against a person arising from any act of that person in furtherance of the person's right of petition or free speech under the United States Constitution or the California Constitution in connection with a public issue shall be subject to a special motion to strike, unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim." The analysis of an anti-SLAPP motion thus involves two steps. "First, the court decides whether the defendant has made a threshold showing that the challenged cause of action is one `arising from' protected activity. (§ 425.16, subd. (b)(1).) If the court finds such a showing has been made, it then must consider whether the plaintiff has demonstrated a probability of prevailing on the claim." ( City of Cotati v. Cashman (2002) 29 Cal.4th 69, 76 [ 124 Cal.Rptr.2d 519, 52 P.3d 695].) "Only a cause of action that satisfies both prongs of the anti-SLAPP statute — i.e., that arises from protected speech or petitioning and lacks even minimal merit — is a SLAPP, subject to being stricken under the statute." ( NaveUier v. Sletten (2002) 29 Cal.4th 82, 89 [ 124 Cal.Rptr.2d 530, 52 P.3d 703].) We review an order granting or denying a motion to strike under section 425.16 de novo. ( Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 269, fn. 3 [ 46 Cal.Rptr.3d 638, 139 P.3d 30].)

Ordinarily we would proceed to consider the two prongs in order. In light of this court's "inherent, primary authority over the practice of law" ( Obrien v. Jones (2000) 23 Cal.4th 40, 57 [ 96 Cal.Rptr.2d 205, 999 P.2d 95]), however, we will proceed in these particular circumstances directly to the second prong, inasmuch as we have readily found that Oasis has demonstrated a probability of prevailing on its claims.

To satisfy the second prong, "a plaintiff responding to an anti-SLAPP motion must `"state[] and substantiate[] a legally sufficient claim."' [Citation.] Put another way, the plaintiff `must demonstrate that the complaint is both legally sufficient and supported by a sufficient prima facie showing of facts to sustain a favorable judgment if the evidence submitted by the plaintiff is credited.'" ( Wilson v. Parker, Covert Chidester (2002) 28 Cal.4th 811, 821 [ 123 Cal.Rptr.2d 19, 50 P.3d 733].) "We consider `the pleadings, and supporting and opposing affidavits . . . upon which the liability or defense is based.' (§ 425.16, subd. (b)(2).) However, we neither `weigh credibility [nor] compare the weight of the evidence. Rather, [we] accept as true the evidence favorable to the plaintiff [citation] and evaluate the defendant's evidence only to determine if it has defeated that submitted by the plaintiff as a matter of law.'" ( Soukup v. Law Offices of Herbert Hafif supra, 39 Cal.4th at p. 269, fn. 3.) If the plaintiff "can show a probability of prevailing on any part of its claim, the cause of action is not meritless" and will not be stricken; "once a plaintiff shows a probability of prevailing on any part of its claim, the plaintiff has established that its cause of action has some merit and the entire cause of action stands." ( Mann v. Quality Old Time Service, Inc. (2004) 120 Cal.App.4th 90, 106 [ 15 Cal.Rptr.3d 215], original italics.)

We shall consider the causes of action for breach of fiduciary duty, professional negligence, and breach of contract together, as all three claims are based on Goldman's alleged breach of his duties as former counsel to Oasis. The elements of a cause of action for breach of fiduciary duty are the existence of a fiduciary relationship, breach of fiduciary duty, and damages. ( Shopoff Cavallo LLP v. Hyon (2008) 167 Cal.App.4th 1489, 1509 [ 85 Cal.Rptr.3d 268].) The elements of a cause of action for professional negligence are (1) the existence of the duty of the professional to use such skill, prudence, and diligence as other members of the profession commonly possess and exercise; (2) breach of that duty; (3) a causal connection between the negligent conduct and the resulting injury; and (4) actual loss or damage resulting from the professional negligence. ( Ibid.) And the elements of a cause of action for breach of contract are (1) the existence of the contract, (2) plaintiffs performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to the plaintiff. ( Reichert v. General Ins. Co. (1968) 68 Cal.2d 822, 830 [ 69 Cal.Rptr. 321, 442 P.2d 377].)

The complaint identifies a number of acts of alleged misconduct and theories of recovery, but for purposes of reviewing the ruling on an anti-SLAPP motion, it is sufficient to focus on just one. Oasis contends that Goldman, as its lawyer, was "a fiduciary . . . of the very highest character" and bound "to most conscientious fidelity — uberrima fides." (Cox v. Delmas (1893) 99 Cal. 104, 123 [ 33 P. 836].) Among those fiduciary obligations were the duties of loyalty and confidentiality, which continued in force even after the representation had ended. ( Wutchumna Water Co. v. Bailey, supra, 216 Cal. at pp. 573-574.) As we have previously explained, "[t]he effective functioning of the fiduciary relationship between attorney and client depends on the client's trust and confidence in counsel. [Citation.] The courts will protect clients' legitimate expectations of loyalty to preserve this essential basis for trust and security in the attorney-client relationship." ( People ex rel. Dept. of Corporations v. SpeeDee Oil Change Systems, Inc. (1999) 20 Cal.4th 1135, 1146-1147 [ 86 Cal.Rptr.2d 816, 980 P.2d 371].) Accordingly, "an attorney is forbidden to do either of two things after severing [the] relationship with a former client. [The attorney] may not do anything which will injuriously affect [the] former client in any matter in which [the attorney] formerly represented [the client] nor may [the attorney] at any time use against [the] former client knowledge or information acquired by virtue of the previous relationship." ( Wutchumna Water Co., supra, 216 Cal. at pp. 573-574; see People ex rel. Deukmejian v. Brown (1981) 29 Cal.3d 150, 155 [ 172 Cal.Rptr. 478, 624 P.2d 1206] [quoting Wutchumna Water Co.]; Brand v. 20th Century Ins. Co./21st Century Ins. Co. (2004) 124 Cal.App.4th 594, 602 [ 21 Cal.Rptr.3d 380] [same].)

Oasis contends that defendants violated this prohibition in a number of ways. Oasis asserts in particular that Goldman acquired confidential and sensitive information relating to the Hilton project through the course of the representation (see also People ex rel. Deukmejian v. Brown, supra, 29 Cal.3d at p. 156 [a presumption that confidences were disclosed arises from the existence of the attorney-client relationship]), particularly during team meetings that discussed matters of strategy with respect to the city council, other city officials, and civic organizations, and that Goldman then used this information when he actively opposed the precise project he had been retained to promote. Although Oasis does not offer direct evidence that Goldman relied on confidential information in formulating his opposition or in crafting his plea to his neighbors to join him in opposing the project, the proper inquiry in the context of an anti-SLAPP motion "is whether the plaintiff proffers sufficient evidence for such an inference." ( Drum v. Bleau, Fox Associates (2003) 107 Cal.App.4th 1009, 1021 [ 132 Cal.Rptr.2d 602], disapproved on another ground in Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1065 [ 39 Cal.Rptr.3d 516, 128 P.3d 713].) In light of the undisputed facts that Goldman agreed to represent Oasis in securing approvals for the project, acquired confidential information from Oasis during the course of the representation, and then decided to publicly oppose the very project that was the subject of the prior representation, it is reasonable to infer that he did so. Moreover, inasmuch as Goldman was obligated under rule 3-310(B) of the State Bar Rules of Professional Conduct to disclose to Oasis any personal relationship or interest that he knew or reasonably should have known could substantially affect the exercise o: his professional judgment — but never did so — it is likewise reasonable to infer that Goldman's opposition to the project developed over the course of the representation, fueled by the confidential information he gleaned during it. Oasis further claims that, because of Goldman's overt acts in opposition to the project, it was forced to investigate Goldman's conduct and prepare a letter demanding defendants'. adherence to their legal and fiduciary duties, thereby incurring over $3,000 in legal fees. Based on this showing and the inferences therefrom, we conclude that Oasis has demonstrated a likelihood of prevailing on each of its three causes of action.

Defendants offer a number of arguments as to why the causes of action are neither legally nor factually sufficient, but none of them is persuasive.

Defendants argue first that the duty we outlined in Wutchumna Water Co. v. Bailey, supra, 216 Cal. 564 is overbroad and should be read to apply in only two specific circumstances: (1) where the attorney has undertaken a concurrent or successive representation that is substantially related to the prior representation and is adverse to the former client, or (2) where the attorney has disclosed confidential information. The Court of Appeal explicitly limited the duty to these two circumstances based solely on the fact that "all the cases which recite this rule do so in the context of subsequent representations or employment," and in those cases the attorney's duties to the new client would otherwise conflict with the attorney's duties to the former client. But neither defendants nor the Court of Appeal offer any justification for limiting an attorney's duty to a former client in this manner, especially where the attorney has used the former client's confidential information to actively oppose the former client with respect to an ongoing matter that was the precise subject of the prior representation. It is well established that the duties of loyalty and confidentiality bar an attorney not only from using a former client's confidential information in the course of "making decisions when representing another client," but also from "taking the information significantly into account in framing a course of action" such as "deciding whether to make a personal investment" — even though, in the latter circumstance, no second client exists and no confidences are actually disclosed. (Rest.3d Law Governing Lawyers, § 60, com. c(i), p. 464.)

It is not difficult to discern that use of confidential information against a former client can be damaging to the client, even if the attorney is not working on behalf of a new client and even if none of the information is actually disclosed. For example, an attorney may discover, in the course of the representation of a real estate developer, that city officials are particularly concerned about the parking and traffic impacts of a proposed development, or that an identifiable population demographic is especially disposed to oppose the proposed development. Under the interpretation proposed by defendants and adopted by the Court of Appeal, the attorney would be free to terminate the representation of the developer and use this information to campaign (quite effectively, one would imagine) against the precise project the attorney had previously been paid to promote. Inasmuch as the harm to the client is the same, the rule appropriately bars the attorney from both disclosing or using the former client's confidential information against the former client. ( People ex rel. Deukmejian v. Brown, supra, 29 Cal.3d at p. 156.) Indeed, the same rule prevails in most jurisdictions, as evidenced by the Restatement Third of the Law Governing Lawyers, section 60: "(1) Except as provided in §§ 61-67, during and after representation of a client: [¶] (a) the lawyer may not use or disclose confidential client information . . . if there is a reasonable prospect that doing so will adversely affect a material interest of the client. . . ."(See also Rest.3d Law Governing Lawyers, § 60, com. c(i), p. 464 ["Both use and disclosure adverse to the client are prohibited."]; Assn. of Bar of City of New York, Com. on Prof. Jud. Ethics, formal opn. No. 1997-3, Lawyer's right to engage in activity or express a personal view-point which is not in accordance with a client's interests ["a lawyer may not, in the course of discussing his or her view on a public issue, misuse or reveal a client confidence"].)

Santa Clara County Counsel Attys. Assn. v. Woodside (1994) 7 Cal.4th 525 [ 28 Cal.Rptr.2d 617, 869 P.2d 1142], on which the Court of Appeal relied, is plainly distinguishable. In that case, we held that attorneys employed in the public sector, who exercise their statutory right to sue their public agency employer to resolve disputes regarding wages or other conditions of employment, do not thereby violate their duty of loyalty. ( Id. at p. 553.) The attorneys' lawsuit on their own behalf, unlike the situation here, did not present a conflict with the client on matters in which the attorneys represented the county ( id. at p. 546), and we emphasized that "attorneys in such circumstances are held to the highest ethical obligations to continue to represent the client in the matters they have undertaken, and that a violation of their duty to represent the client competently or faithfully, or of any other rule of conduct, will subject those attorneys to the appropriate discipline, both by the employer and by the State Bar." ( id. at p. 553.)

Defendants' contention that they were somehow relieved of their duties of loyalty and confidentiality by section 125 of the Restatement Third of the Law Governing Lawyers is mistaken. A comment to that provision explains that " [i]n general, a lawyer may publicly take personal positions on controversial issues without regard to whether the positions are consistent with those of some or all of the lawyer's clients. . . . For example, if tax lawyers advocating positions about: tax reform were obliged to advocate only positions that would serve the positions of their present clients, the public would lose the objective contributions to policy making of some persons most able to help, [¶] However, a lawyer's right to freedom of expression is modified by the lawyer's duties to clients. . . . The requirement that a lawyer not misuse a client's confidential information (see § 60) similarly applies to discussion of public issues." (Rest.3d Law Governing Lawyers, § 125, com. e, p. 315, italics added; see also id., § 33(2), p. 240 ["Following termination of a representation, a lawyer must: [¶] . . . [¶] (d) take no unfair advantage of a former client by abusing knowledge or trust acquired by means of the representation."].)

An illustration in the Restatement discussion of section 125 demonstrates the distinction: "Lawyer represents Corporation in negotiating with the Internal Revenue Service to permit Corporation to employ accelerated depreciation methods for machinery purchased in a prior tax year. At the same time, Lawyer believes that the accelerated depreciation laws for manufacturing equipment reflect unwise public policy. Lawyer has been working with a bar association committee to develop a policy statement against the allowance, and the committee chair has requested Lawyer to testify in favor of the report and its proposal to repeal ill such depreciation allowances. Any new such legislation, as is true generally of such tax enactments, would apply only for current and future tax years, thus not directly affecting Corporation's matter before the IRS. Although the [current] legislation would be against Corporation's economic interests. Lawyer may, without Corporation's consent, continue the representation of Corporation while working to repeal the allowance." (Rest.3d Law Governing Lawyers, § 125, com. e, illus. 6, p. 316.) Defendants' alleged conduct here is not analogous to "Lawyer's" efforts to repeal depreciation allowances in the future. What Oasis alleges here, in the terms of the analogy above, is that Lawyer, after obtaining IRS approval of the depreciation allowance, withdrew and then, on Lawyer's own behalf, sought to have "Corporation's" depreciation allowance for that prior tax year overturned and used confidential information to make that case. Defendants have not identified any authority to countenance such conduct, and our own research has uncovered none.

Defendants complain that a "broad categorical bar on attorney speech" would lead to a parade of horribles. They warn that a lawyer would be prevented even from voting in an election against the former client's interest and that the prohibition would necessarily extend to every attorney in an international law firm. It seems doubtful that a single vote in a secret ballot in opposition to a client's interest would offer "a reasonable prospect" of "adversely affect[ing] a material interest of the client." (Rest.3d Law Governing Lawyers, § 60(1)(a).) In any event, we are not announcing a broad categorical bar here, nor are we presented with a situation requiring us to articulate how imputed disqualification rules would apply in this context. Our task is solely to determine whether any portion of Oasis's causes of action have even minimal merit within the meaning of the anti-SLAPP statute. A claim that Goldman used confidential information acquired during his representation of Oasis in active and overt support of a referendum to overturn the city council's approval of the Hilton project, where the council's approval of the project was the explicit objective of the prior representation, meets that low standard.

The absence of a "broad categorical bar on attorney speech" also disposes of defendants' attempt to interpose a First Amendment defense. Defendants assert that "preventing client suspicions that their former attorneys will use confidential information . . . is not a compelling state interest." But the claim before us, under the second step of the anti-SLAPP analysis, does not propose a "broad prophylactic prohibition[] of political speech" to guard against a mere "suspicion without proof that Goldman may have used confidential information. Rather, as demonstrated above, Oasis has presented a prima facie case that Goldman id. use confidential information, to the detriment of his former client, with respect to the precise subject of the prior representation. Defendants have cited no authority to suggest the First Amendment would protect such duplicity. (See generally Gentile v. State Bar of Nevada (1991) 501 U.S. 1030, 1081-1082 [ 115 L.Ed.2d 888, 111 S.Ct. 2720] (cone. opn. of O'Connor, J.) ["Lawyers are officers of the court and, as such, may legitimately be subject to ethical precepts that keep them from engaging in what otherwise might be constitutionally protected speech."]; cf. American Motors Corp. v. Hujfstutler (1991) 61 Ohio St.3d 343 [ 575 N.E.2d 116, 120] [" `[t]here is no constitutional bar to the issuance of an injunction against unlawful use of confidential business information'"].)

The Court of Appeal cited Johnston v. Koppes (9th Cir. 1988) 850 F.2d 594, but the case is not helpful to defendants. In Johnston, an attorney employed by the State Department of Health Services attended a legislative committee hearing on the subject of the use of state funds for abortion. The attorney, whose views on that subject diverged from those of the office that employed her, did not speak at the hearing or communicate her views in any manner, but the department nonetheless demoted her and transferred her to another section. ( Id. at p. 595.) In the course of upholding the denial of the department's motion for summary judgment as to the attorney's cause of action under 42 United States Code section 1983, the Ninth Circuit stated that "[l]oyal:y to a client requires subordination of a lawyer's personal interests when acting in a professional capacity. But loyalty to a client does not require extinguishment of a lawyer's deepest convictions; and there are occasions where exercise of these convictions — even an exercise debatable in professional terms — is protected by the Constitution." ( Johnston, supra, 850 F.2d at p. 596.) Inasmuch as there was no allegation that the attorney acted in any way against the department as to a specific and ongoing matter on which she was then representing or had previously represented the department, nor was there any allegation that she had used or disclosed confidential information acquired by virtue of her employment, Johnston does not suggest that the conduct alleged by Oasis would be protected by the Constitution.

Finally, we conclude that Oasis has set forth a prima facie case of actual injury and entitlement to damages. Oasis asserts that because of Goldman's active and overt opposition to the Hilton project, it was compelled to protect its rights by retaining legal counsel to prepare a letter demanding that Goldman cease and desist from further misconduct. The cost of this remediation exceeded $3,000. It is "the established rule that attorney fees incurred as a direct result of another's tort are recoverable damages." ( Jordache Enterprises, Inc. v. Brobeck, Phleger Harrison (1998) 18 Cal.4th 739, 751 [ 76 Cal.Rptr.2d 749, 958 P.2d 1062].) In particular, recoverable damages include "the expense of retaining another attorney" when reasonably necessary to "attempt to avoid o:: minimize the consequences of the former attorney's negligence." (3 Mallen Smith, Legal Malpractice (2011 ed.) § 21:6, p. 23; see also id., § 21:10, p. 34 ["A client may incur attorneys' fees and litigation expenses in attempting to avoid, minimize, or reduce the damage caused by attorneys' wrongful conduct."].)

Based on the respective showings of the parties, we conclude that Oasis's claims for breach of fiduciary duty, professional negligence, and breach of contract possess at least minimal merit within the meaning of the anti-SLAPP statute. On this ground, we therefore reverse the judgment of the Court of Appeal.

DISPOSITION

The judgment of the Court of Appeal is reversed.

Cantil-Sakauye, C. J., Werdegar, J., Chin, J., and Corrigan, J., concurred.

KENNARD, J.

Concurring. — Plaintiff Oasis West Realty, LLC (Oasis), hired attorney Kenneth A. Goldman and his law firm to assist Oasis in obtaining local government approval for a redevelopment project. About two years later, Goldman terminated the representation, and about two years after that, Goldman became involved in a public campaign opposing the very same redevelopment project. Specifically, Goldman solicited signatures for a petition to overturn the local government's approval of the project. Oasis then sued Goldman and his law firm for breach of fiduciary duty, professional negligence, and breach of contract. Defendants moved to strike the complaint under Code of Civil Procedure section 425.16, which establishes a special procedure for early dismissal of SLAPP lawsuits, which are suits based on the defendant's exercise of the right of petition or speech in connection with a public issue. SLAPP is an acronym for "strategic lawsuit against public participation." ( Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 57 [ 124 Cal.Rptr.2d 507, 52 P.3d 685].) The trial court denied defendants' anti-SLAPP motion, and the Court of Appeal reversed.

I concur in the majority's decision to reverse the judgment of the Court of Appeal, and 1 agree with most of the majority's reasoning. Unlike the majority, however, I would not bypass the first step of the anti-SLAPP analysis.

The majority correctly explains: "The analysis of an anti-SLAPP motion . . . involves two steps. `First, the court decides whether the defendant has made a threshold showing that the challenged cause of action is one "arising from" protected activity. ([Code Civ. Proc.,] § 425.16, subd. (b)(1).) If the court finds such a showing has been made, it then must consider whether the plaintiff has demonstrated a probability of prevailing on the claim.' ( City of Cotati v. Cashman (2002) 29 Cal.4th 69, 76 [ 124 Cal.Rptr.2d 519, 52 P.3d 695].)" (Maj. opn., ante, at pp. 819-820.) The majority, however, skips the first step of that analysis. The majority states: "Ordinarily we would proceed to consider the two prongs in order. In light of this court's `inherent, primary authority over the practice of law' ( Obrien v. Jones (2000) 23 Cal.4th 40, 57 [ 96 Cal.Rptr.2d 205, 999 P.2d 95]), however, we will proceed in these particular circumstances directly to the second prong, inasmuch as we have readily found that Oasis has demonstrated a probability of prevailing on its claims." (Maj. opn., ante, at p. 820.)

I agree that Oasis has demonstrated a probability of prevailing on its claims. But I do not share the majority's view that simply because Oasis's lawsuit concerns Goldman's duties as an attorney and this court has "inherent, primary authority over the practice of law" ( Obrien v. Jones, supra, 23 Cal.4th at p. 57), this court can readily dispense with the first step of the anti-SLAPP analysis and proceed directly to the second step. The majority's approach would not be available to a Court of Appeal or a superior court, neither of which has primary authority over the practice of law.

The majority's approach is particularly surprising here, because defendants have easily made the necessary showing that the action by Oasis is based on Goldman's exercise of his constitutional right to free speech in connection with a public issue. Subdivision (e) of Code of Civil Procedure section 425.16 defines the phrase `"act in furtherance of a person's right of . . . free speech . . . in connection with a public issue'" to include "any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law." Here, Goldman solicited signatures for a petition to overturn a local government's approval of a redevelopment project. It is hard to imagine conduct that more squarely fits the definition set forth in subdivision (e), and Oasis's lawsuit is based directly on that conduct. If Goldman had not exercised his free speech rights in support of the petition — if instead he had kept his views to himself — the alleged injury to Oasis would not have occurred, and Oasis would have had no basis for a lawsuit against Goldman and his law firm.

This is not to suggest that constitutional protections of speech permitted Goldman to speak against the Oasis project with impunity. As an attorney, Goldman's right to free speech was restricted insofar as it was adverse to a former client and concerned the same subject matter as the former representation. (See maj. opn., ante, at p. 825.) But the fact remains that Oasis's lawsuit is based on Goldman's exercise of the right of speech, and therefore the anti-SLAPP statute applies. To invoke that statute, a defendant need not go so far as to establish that the relevant speech or petition activity is constitutionally protected as a matter of law, if that were the rule, `"then the [secondary] inquiry as to whether the plaintiff has established a probability of success would be superfluous.'" ( Navellier v. Sletten (2002) 29 Cal.4th 82, 95 [ 124 Cal.Rptr.2d 530, 52 P.3d 703], quoting Fox Searchlight Pictures, Inc. v. Paladino (2001) 89 Cal.App.4th 294, 305 [ 106 Cal.Rptr.2d 906].) Rather, the defendant need only show the existence of a legitimate issue as to whether the speech or petition activity is constitutionally protected. ( Flatley v. Mauro (2006) 39 Cal.4th 299, 311-320 [ 46 Cal.Rptr.3d 606, 139 P.3d 2].)

I conclude that defendants here made the showing necessary to satisfy the first inquiry in the anti-SLAPP analysis, a step bypassed by the majority. Regarding the second inquiry, however, I agree with the majority that Oasis has shown a probability of prevailing, and therefore the trial court was correct to deny defendants' anti-SLAPP motion. Accordingly, I concur in the majority's judgment.

Doi Todd, J., concurred.

Associate Justice of the Court of Appeal, Second Appellate District, Division Two, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.

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OASIS WEST REALTY, LLC v. GOLDMAN
(May 16, 2011)