Filed 5/22/26 Cypers v. Bandlow CA2/5
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FIVE
REUVEN JUSTIN CYPERS et al.,
Plaintiffs and
Respondents,
v.
LINCOLN D. BANDLOW et al., Defendants and
Appellants.
B340653
(Los Angeles County Super. Ct. No.
23VECV00811)
APPEAL from an order of the Superior Court of Los Angeles County, Shirley K. Watkins, Judge. Affirmed. Law Offices of Lincoln Bandlow and Lincoln D. Bandlow for Defendants and Appellants.
Catanzarite, Kenneth J. Catanzarite and Brandon E. Woodward for Plaintiffs and Respondents.
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I. INTRODUCTION
The trial court denied defendants'1special motion to strike plaintiffs'2malicious prosecution action pursuant to Code of Civil Procedure section 425.16, also known as the anti-SLAPP statute.3On appeal, defendants contend the trial court erred because plaintiffs failed to demonstrate their claim had minimal merit. We affirm.
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II. BACKGROUND4
A. Dispute Between Cypers and Granatelli Plaintiffs worked in the credit card processing industry and acted as resellers of services. RIO leased premises located in Agoura Hills (the premises) from which it conducted its business. Joseph R. Granatelli, a childhood friend of Cypers, worked in the automotive industry.
In late 2016, Cypers and Granatelli agreed to co-own and serve as directors and officers of Impact Merchant Solutions, Inc. (Impact), which they "formed to market and promote [m]erchant[ ] services to process credit and debit card transactions related services" to Granatelli's automotive industry contacts. Granatelli had no experience in the merchant services business so plaintiffs allowed him to observe RIO's office operations at the premises.
In April 2017, Granatelli concluded that he would not be successful marketing to automotive industry prospects and devised an "exit strategy scheme" to take plaintiffs' business, including their "[m]erchant[ ] accounts, proprietary trade secret information property …, files, data, and hundreds of thousands of
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dollars …." On April 13, 2017, pursuant to his exit strategy scheme, Granatelli forged Cypers's name on a contract concerning a partnership between Cypers and Granatelli, the formation of Impact, and Granatelli's compensation (the putative contract).
On August 23, 2017, after Cypers overheard Granatelli offering to give a competitor trade secrets and customer accounts, Cypers requested that Granatelli leave the premises. B. Granatelli's Lawsuits
1. The Breach of Contract Action On August 24, 2017, Granatelli, represented by David Gurnick, Stephen T. Holzer, and the law firm of Lewitt, Hackman, Shapiro, Marshall & Harlan (Lewitt firm)5, filed a verified complaint in the Los Angeles County Superior Court, case No. LC106120 (the breach of contract action), alleging, among other things, breach of contract and accounting. Granatelli alleged that plaintiffs had breached the putative contract, which was attached as an exhibit to the complaint. The attached contract bore the signature of Granatelli and the purported signature of Cypers.
Sometime before September 6, 2017, Granatelli (still represented by the Lewitt firm) obtained a temporary restraining order in the breach of contract action and filed a motion for an order to show cause for a preliminary injunction. On
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September 6, 2017, plaintiffs filed an opposition to the motion for order to show cause, arguing that the complaint was premised on a forgery.
2. Expert Evidence Regarding Forgery In support of their opposition to the order to show cause, plaintiffs submitted a declaration from Michael Kunkel, a computer forensic analyst, and supporting exhibits. Kunkel declared that he had used computer forensic tools to examine computers previously used by Granatelli and concluded that Granatelli had inserted a photo image of Cypers's signature onto the putative contract. He also explained that his examination demonstrated that on April 6, 2017, at 3:00 p.m., jrgranatelli@granatellimotorsports.com sent to jr@impactmerchantsolutions.com an agreement that looked like a blank version of the putative contract, that is, it did not include a date, signature lines for Cypers or Granatelli, or the purported signatures of Cypers or Granatelli. Then, on April 13, 2017, at 1:00 p.m., jrgranatelli@granatellimotorsports.com sent to jr@impactmerchantsolutions.com a copy of the putative contract that now included a "Dated" line, signature lines for Cypers and Granatelli, and Cypers's purported signature. Kunkel explained that the agreement "contain[ed] an [sic] pictorial image inside of the word document that is made to look like a signature under the name 'Rory J Cypers.'"
Cypers subsequently filed a police report with the Los Angeles County Sheriff's Department, asserting Granatelli committed forgery.
On September 11, 2017, Granatelli filed a reply and submitted his declaration in support. Granatelli declared that
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"[t]he [putative contract] is authentic" and "[Cypers's] claim of forgery is false." Granatelli further declared: "The circumstances of the re-transmittal in April 2017 were that [Granatelli] was not receiving the full payments … Cypers and [he] had agreed. [Granatelli] was re-transmitting the signed document to show … Cypers and RIO's financial officer …. That is why the document—which was in existence since January [2017]—was being transmitted on that April 2017 date."
3. The Underlying Action On October 11, 2017, Granatelli, still represented by the Lewitt firm, filed a complaint for declaratory relief, styled as a shareholder derivative action, in Los Angeles County Superior Court, case No. LC106344 (the underlying action), the case at issue in the malicious prosecution complaint. Granatelli alleged that: "Pursuant to the written agreement of these two parties, a true and correct copy of which is attached as [an exhibit to the complaint], all new credit-card processing business written after January 1, 2017 was and is to belong to [Impact]." The complaint again attached the putative contract as an exhibit. Granatelli named as defendants Cypers, Impact, and various independent sales organizations, and alleged that the independent sales organizations were paying residuals to RIO, rather than to Impact, in violation of the putative contract and sought as relief a declaration that "[p]er the [putative contract] … all new accounts acquired after January 1, 2017 which would otherwise have gone to [plaintiffs] … were supposed to go to [Impact.]"
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4. Bifurcated Trial and Defendants' Appearance On November 3, 2017, the trial court ordered the breach of contract action and the underlying action related for all purposes. The court also ordered a bifurcated trial to be held on December 18, 2017, to determine whether the putative contract was a forgery, and stayed the underlying action. On November 20, 2017, defendant Bandlow and Rom Bar- Nassim, who were then attorneys with Fox Rothschild LLP, filed a notice of appearance on behalf of Granatelli, in the breach of contract action.6
On December 6, 2017, Granatelli (who was still represented by defendant Bandlow and the Lewitt firm) filed an ex parte application to continue the bifurcated trial and to stay both the breach of contract action and the underlying action pending the criminal investigation of Granatelli. The trial court granted the application.
On February 5, 2018, plaintiffs filed motions seeking sanctions against Granatelli and the Lewitt firm for the filing of a frivolous complaint, namely, the underlying action. On February 22, 2018, the Lewitt firm withdrew as counsel for Granatelli in the underlying action. Defendant Bandlow consented to continue as counsel for Granatelli in the underlying action.
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5. Granatelli's Conviction, First Amended Complaints, and Demurrers
On January 28, 2019, Granatelli pled no contest to felony identity theft in violation of Penal Code section 530.5, subdivision (a). Granatelli admitted that he forged Cypers's signature on the putative contract and agreed to pay Cypers $80,000 as restitution.
In April 2019, defendant Bandlow left Fox Rothschild LLP to start his own law firm, defendant Law Offices, and continued to represent Granatelli in the underlying action.7 On May 7, 2019, defendant Bandlow, now associated with defendant Law Offices, filed a notice of change of address or other contact information in the breach of contract action and the underlying action.
On August 8, 2019, the trial court lifted the stay. On December 13, 2019, the trial court ruled on plaintiffs' sanctions motions and denied them. The court observed that plaintiffs' contention that the putative contract was a forgery
"appears to be confirmed by the criminal action against [Granatelli]." The court noted, however, that Granatelli "avers and offers corroborating declarations that a contract does exist and that the terms are identical to the forged document." The
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court therefore struck the complaints with "leave to amend to allege a lost or missing contract."
On December 20, 2019, Granatelli, represented by defendants, filed first amended complaints in the breach of contract action and the underlying action. Granatelli continued to allege the existence of a written and signed contract between him and Cypers, which contained essentially the same terms as set forth in the putative contract. The first amended complaint to the breach of contract action alleged that the putative contract
"was in writing, signed by the parties. However, Cypers has all existing original copies of the agreement." The first amended complaint to the underlying action did not include an allegation regarding a lost or missing contract.
Plaintiffs demurred to the first amended complaints. On September 29, 2020, the trial court issued its ruling on the demurrers. In describing the first amended complaint of the underlying action, the court stated, among other things, that
"[Granatelli] simply omits reference to the [putative contract]. There is no explanation as to why it was left off. This is a sham pleading." The court sustained plaintiffs' demurrer to Granatelli's first amended complaint in the underlying action without leave to amend.8On November 4, 2020, the trial court
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issued its order sustaining the demurrer to the first amended complaint of the underlying action without leave to amend. On October 9, 2020, defendants moved for reconsideration of the September 29, 2020, order, which the trial court denied on November 9, 2020.
On November 30, 2020, Granatelli filed a notice of appeal from the September 29, 2020, and November 9, 2020, orders. On December 16, 2020, the trial court entered judgment in the underlying action.
6. Postjudgment Settlement On April 20, 2021, defendants withdrew as Granatelli's counsel.
On December 17, 2021, plaintiffs and Granatelli entered into a settlement agreement, pursuant to which Granatelli agreed to pay $200,000 to plaintiffs, and the parties agreed to settle and release all remaining claims between them. The settlement agreement listed, among other disputes between the parties, the breach of contract action and the underlying action. On March 11, 2022, Granatelli filed a request for dismissal, with prejudice, of the breach of contract and underlying actions. And, on March 15, 2022, at Granatelli's request, the court of appeal dismissed his pending appeal.
C. Malicious Prosecution Complaint and anti-SLAPP Motion On February 22, 2023, plaintiffs filed the operative complaint for malicious prosecution against, among others, defendants.
On May 6, 2024, defendants filed their special motion to strike the complaint. They argued that plaintiffs could not
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demonstrate a probability of prevailing on their malicious prosecution claim. In support, defendants submitted a declaration from defendant Bandlow, who testified that he did not learn that the putative contract was a forgery until December 2018, when Granatelli admitted to Bandlow that he had forged the putative contract. Granatelli maintained, however, that the agreement did exist, Granatelli "had kept a copy of the signed version in his office[,] and Cypers had a copy of the signed version." Granatelli advised Bandlow that at some point in spring 2017, Granatelli discovered that his copy of the signed agreement was missing from his office. Defendants attached as exhibits email communications and other documents, including Cypers's criminal history of fraud and related crimes. Defendants requested judicial notice of various court filings in the underlying and breach of contract actions, and other cases involving Cypers, including declarations from witnesses attesting to the existence of an agreement between Granatelli and Cypers. Plaintiffs filed an opposition and submitted their own exhibits in support. Defendants filed a reply. On June 25, 2024, the trial court heard argument on the special motion to strike and took the matter under submission. On June 25, 2024, the court granted the request for judicial notice and denied the motion. The court noted that plaintiffs conceded that defendants had met the first prong of the anti- SLAPP analysis and found that plaintiffs had satisfied the second prong of the analysis by showing that they could prevail on their malicious prosecution complaint. Defendants timely appealed.
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III. DISCUSSION
A. Legal Standards
"Resolution of an anti-SLAPP motion involves two steps. First, the defendant must establish that the challenged claim arises from activity protected by section 425.16. [Citation.] If the defendant makes the required showing, the burden shifts to the plaintiff to demonstrate the merit of the claim by establishing a probability of success. We have described this second step as a 'summary-judgment-like procedure.' [Citation.] The court does not weigh evidence or resolve conflicting factual claims. Its inquiry is limited to whether the plaintiff has stated a legally sufficient claim and made a prima facie factual showing sufficient to sustain a favorable judgment. It accepts the plaintiff's evidence as true, and evaluates the defendant's showing only to determine if it defeats the plaintiff's claim as a matter of law. [Citation.] '[C]laims with the requisite minimal merit may proceed.' [Citation.]" (Baral, supra, 1 Cal.5th at pp. 384-385, fn. omitted.) We review the trial court's order de novo. (Sweetwater Union High School Dist. v. Gilbane Building Co. (2019) 6 Cal.5th
931, 940.)
The parties do not dispute that defendants satisfied their first prong burden of showing that the challenged action for malicious prosecution arose from activity protected by section
425.16. (Citizens of Humanity, LLC v. Ramirez (2021) 63 Cal.App.5th 117, 127 (Citizens of Humanity).) Accordingly, we turn to prong two—whether plaintiffs have demonstrated a probability of prevailing on their claim for malicious prosecution.
"'An action for malicious prosecution has three required elements:
"(1) the defendant brought (or continued to pursue) a claim in the
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underlying action without objective probable cause, (2) the claim was pursued by the defendant with subjective malice, and (3) the underlying action was ultimately resolved in the plaintiff's favor."
[Citation.]' [Citation.]" (Id. at p. 128.)
B. Analysis
1. Lack of Probable Cause
"'The question of probable cause is "whether, as an objective matter, the prior action was legally tenable or not."
[Citation.] "A litigant will lack probable cause for his action either if he relies upon facts which he has no reasonable cause to believe to be true, or if he seeks recovery upon a legal theory which is untenable under the facts known to him." [Citation] "In a situation of complete absence of supporting evidence, it cannot be adjudged reasonable to prosecute a claim."' [Citation.] Thus, '"probable cause is lacking 'when a prospective plaintiff and counsel do not have evidence sufficient to uphold a favorable judgment or information affording an inference that such evidence can be obtained for trial.'"' [Citations.] [¶] The court must '"'make an objective determination of the "reasonableness"
of [defendant's] conduct, i.e., to determine whether, on the basis of the facts known to [defendant], the institution [and prosecution] of the [lawsuit] was legally tenable.'"' [Citation.] '"The test applied to determine whether a claim is tenable is 'whether any reasonable attorney would have thought the claim tenable.'"' [Citation.]" (Golden State Seafood, Inc. v. Schloss (2020) 53 Cal.App.5th 21, 33.) Moreover, "an attorney may be held liable for malicious prosecution for continuing to prosecute a
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lawsuit discovered to lack probable cause." (Zamos v. Stroud (2004) 32 Cal.4th 958, 970.)
Defendants contend that they did not lack probable cause to maintain the underlying action because they "did not ever rely on the authenticity of the [putative contract] while maintaining the [u]nderlying [a]ction." Further, they contend they acted with probable cause because "there was ample evidence that some agreement existed between Granatelli and Cypers regarding [Impact]." We reject the arguments.
Even if defendants had probable cause to believe that some agreement existed between Granatelli and Cypers, the underlying action they maintained was not premised on some agreement, but on a particular agreement, namely, the putative contract that was attached as an exhibit to the complaint. And, by the time defendant Bandlow substituted in as counsel for Granatelli, Cypers's attorneys had provided Granatelli with evidence that the putative contract was a forgery. Yet defendants continued to prosecute the underlying action, including by seeking to continue the trial. Thus, defendants' contention that they did not maintain an action premised on the putative contract is meritless.
Moreover, in April 2019, defendants filed the first amended complaints in the breach of contract action and the underlying action. Although defendants contend that the first amended complaints did not rely on the authenticity of the putative contract, that contention ignores the application of the sham pleading doctrine. "When a plaintiff files an amended complaint, it may not 'omit harmful allegations … from previous complaints.' [Citations.] Unless the plaintiff provides a 'plausible' explanation for dropping the harmful allegations (such as the need to correct
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a mistaken allegation or to clarify ambiguous facts), the trial court will take judicial notice of the harmful allegations and disregard the new and contrary allegations. [Citation.] This is known as the 'sham pleading' doctrine and prevents the abuse of process that would arise if parties could circumvent prior adverse rulings by pleading the underlying facts in the alternative. [Citations.]" (Smyth v. Berman (2019) 31 Cal.App.5th 183, 195-
196.)
Here, the trial court struck the original complaint in the underlying action on the grounds that it was premised on a forged document. Granatelli then amended the complaint in the underlying action by simply omitting reference to the putative contract. He did not allege the existence of a lost or missing contract or otherwise provide a plausible explanation for why he omitted the reference to and attachment of the putative contract. The court therefore sustained a demurrer to the first amended complaint under the sham pleading doctrine. Because Granatelli failed to explain the inconsistency between the original and first amended complaints in the underlying action, "the court may disregard the inconsistent allegations and read into the amended complaint the allegations of the superseded complaint." (Owens
v. Kings Supermarket (1988) 198 Cal.App.3d 379, 384; accord, Lockton v. O'Rourke (2010) 184 Cal.App.4th 1051, 1061; Deveny v. Entropin, Inc. (2006) 139 Cal.App.4th 408, 425-426, fn. 3.) Defendants, as Granatelli's counsel, therefore knowingly filed a first amended complaint premised on a forged contract. No reasonable attorney would find a declaratory relief claim based on a forged document, as here, to be tenable.
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2. Malice
"We now move to the malice element, which 'goes to the defendant's subjective intent in initiating the prior action.' [Citation.] '[M]alice is present when proceedings are instituted primarily for an improper purpose. Suits with the hallmark of an improper purpose are those in which … "'… the person initiating them does not believe that his claim may be held valid [or] the proceedings are begun primarily because of hostility or ill will ….'"' [Citation.] 'Since parties rarely admit an improper motive, malice is usually proven by circumstantial evidence and inferences drawn from the evidence.' [Citation.]" (Cuevas- Martinez v. Sun Salt Sand, Inc. (2019) 35 Cal.App.5th 1109,
1122.)
"[I]f the trial court determines that the prior action was not objectively tenable, the extent of a defendant attorney's investigation and research may be relevant to the further question of whether or not the attorney acted with malice."
(Sheldon Appel Co. v. Albert & Oliker (1989) 47 Cal.3d 863, 883.)
"Malice does not require that the defendants harbor actual ill will toward the plaintiff in the malicious prosecution case, and liability attaches to attitudes that range '"from open hostility to indifference. [Citations.]"'" (Cole v. Patricia A. Meyer & Associates, APC (2012) 206 Cal.App.4th 1095, 1113-1114 (Cole).) Defendants contend that the first amended complaint in the underlying action complied with the court's December 13, 2019, order because it alleged "'an agreement on the terms offered by [Granatelli] exists and is enforceable.'" (Boldface and italics omitted.) Defendants argue that because they were aware of corroborating evidence that the putative contract did exist, plaintiffs could not meet their burden of showing that defendants
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did not act with malice by continuing to prosecute the underlying action. We disagree.
"Malice may be inferred from circumstantial evidence, such as the defendants' lack of probable cause, supplemented with proof that the prior case was instituted largely for an improper purpose." (Cole, supra, 206 Cal.App.4th at p. 1114.) Here, as discussed, defendants continued to prosecute the underlying action, which was premised on a forged contract, even after Granatelli pled guilty to forgery. "Malice could be inferred from [Granatelli's] knowingly false allegations." (Nunez v. Pennisi (2015) 241 Cal.App.4th 861, 878.) On this record, plaintiffs have demonstrated minimal merit for the malice element of their malicious prosecution claim.
3. Favorable Termination Finally, we consider whether plaintiffs could establish that the underlying matter was terminated in their favor.
"[F]avorable termination requires favorable resolution of the underlying action in its entirety, not merely a single cause of action. [Citation.]" (Citizens of Humanity, supra, 63 Cal.App.5th at p. 128.) And, "the action must have been terminated on a basis which reflects upon the innocence of the underlying defendant. 'A "'favorable' termination does not occur merely because a party complained against has prevailed in an underlying action. While the fact he has prevailed is an ingredient of a favorable termination, such termination must further reflect on his innocence of the alleged wrongful conduct. If the termination does not relate to the merits—reflecting on neither innocence of nor responsibility for the alleged misconduct—the termination is not favorable in the sense it
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would support a subsequent action for malicious prosecution."
[Citation.] "'[W]hen the underlying action is terminated in some manner other than by a judgment on the merits, the court examines the record "to see if the disposition reflects the opinion of the court or the prosecuting party that the action would not succeed."' [Citations.]" [Citation.] "Should a conflict arise as to the circumstances of the termination, the determination of the reasons underlying the dismissal is a question of fact. [Citation.]" [Citation.]' [Citation.]" (Id. at pp. 128-129.)
"[A] dismissal on technical or procedural, rather than substantive, grounds is not considered favorable for purposes of malicious prosecution. [Citation.] These include dismissals for lack of jurisdiction, for lack of standing, to avoid litigation expenses, or pursuant to settlement. [Citation.] Generally, a dismissal resulting from a settlement does not constitute a favorable termination because the dismissal reflects ambiguously on the merits of the action. The purpose of a settlement is specifically to avoid a determination on the merits. [Citation.] When litigation is terminated by agreement 'there is ambiguity with respect to the merits of the proceeding and in general no favorable termination for purposes of pursuing a malicious prosecution action occurs. [Citations.]' [Citation.] Even if the action was tried to a verdict, a subsequent bilateral settlement in which each side gave up something of value (reduced payment accepted in exchange for waiving right to appeal) defeats favorable termination as a matter of law. [Citation.]" (Citizens of Humanity, supra, 63 Cal.App.5th at p. 129, fn. omitted.) Here, the trial court entered judgment dismissing the underlying action, following the sustaining of demurrers on the grounds that the complaint was premised on a forgery and after
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applying the sham pleading doctrine. Defendants nonetheless contend that plaintiffs cannot demonstrate the underlying action terminated in their favor because the postjudgment settlement agreement did not specifically preserve the existing judgment, which defendants contend is required by our Supreme Court's precedent in Siebel v. Mittlesteadt (2007) 41 Cal.4th 735, 739, 741 (Seibel). We reject defendants' characterization of the opinion in Siebel, supra, 41 Cal.4th 735. That the settlement agreement at issue in Siebel included language that "specifically provided that it did not modify 'the final termination of the Action entered in favor of [the malicious prosecution plaintiff]'" (id. at p. 739) does not equate to a pronouncement of a rule that a prevailing party must always enter into such a postjudgment settlement. Here, even without an express recitation of such a reservation, the settlement agreement did not disturb the December 16, 2020, judgment in plaintiffs' favor.
Moreover, and contrary to defendants' contention, the postjudgment settlement cannot be characterized as a resolution in which "both sides g[a]ve up anything of value in order to end the litigation …." (Ferreira v. Gray, Cary, Ware & Freidenrich (2001) 87 Cal.App.4th 409, 413-414.) Pursuant to the terms of the settlement agreement, Granatelli (who had already agreed to pay Cypers $80,000 in restitution as part of his plea in the criminal matter) agreed to pay $200,000 to plaintiffs and all the parties agreed to dismiss all remaining claims. "Because [the malicious prosecution plaintiff] received a favorable judgment in the underlying proceeding and settled without giving up any portion of the judgment in his favor, we hold that the parties' settlement constitutes a favorable termination." (Siebel, supra,
41 Cal.4th at p. 743.)
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IV. DISPOSITION
The order denying defendants' special motion to strike is affirmed. Plaintiffs are awarded costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
KIM (D.), J.
We concur:
MOOR, Acting P. J. KUMAR, J.*
* Retired judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.