Medallion Film v. Loeb & Loeb

319 Cal.Rptr.3d 796

MEDALLION FILM LLC et al., Plaintiffs and Appellants,

v.LOEB & LOEB LLP, Defendant and Respondent.

B323356

Court of Appeal, Second District, Division 8.

Filed March 28, 2024

APPEAL from a judgment of the Superior Court of Los Angeles County, Randolph Hammock, Judge. Judgment vacated; reversed and remanded with directions. (Los Angeles County Super. Ct. No. 21STCV45129)

Eanet, Matthew L. Eanet, Los Angeles; Benedon & Serlin, Gerald M. Serlin and Wendy S. Albers, Woodland Hills, for Plaintiffs and Appellants.

Hueston Hennigan and Robert N. Klieger for Defendant and Respondent.

STRATTON, P. J.

Plaintiffs Medallion Film, Pelican Point Capital Partners (Pelican Point), Jesse Kennedy, Shad Quraishi, and Ike Suri appeal from the judgment in favor of Loeb & Loeb following the trial court’s order granting a special motion to strike their first amended complaint. (Code Civ. Proc.,¹ § 425.16.) We vacate the judgment, reverse the order granting the special motion to strike, and remand with directions to enter a new order denying the motion.

FACTUAL AND PROCEDURAL BACKGROUND

In 2014, William Sadleir, as the manager of Clarius Capital Group (Clarius), entered into a consulting fee agreement with plaintiffs Medallion Film and Pelican Point providing that Medallion Film and Pelican Point would assist Clarius in obtaining funding for film projects, and Clarius would pay them a portion of any funding so obtained. Clarius agreed not to directly conduct business or transactions with any of the contacts to whom it was introduced by Medallion Film and Pelican Point. Medallion Film and Pelican Point introduced Clarius to Randy Robertson at BlackRock, one of their contacts listed in the agreement.

Sadleir is alleged to have dissolved Clarius and its affiliate and subsidiary entities in 2015, and to have formed, with the assistance of law firm Loeb & Loeb, a new set of corporate entities under the name Aviron in order to continue marketing Clarius’s film properties. It is alleged that Sadleir controlled both the Clarius and Aviron entities, and that he transferred Clarius’s assets to the Aviron entities.

Later in 2015, Aviron is alleged to have obtained a loan for its film projects from BlackRock, with a further extension of the credit arrangement in 2017. When Medallion Film and Pelican Point learned of this funding in 2017, they allegedly contacted Sadlier, who denied any affiliation between Aviron and Clarius and said he was solely an employee of Aviron.

On March 25, 2018, plaintiff Quraishi, Pelican Point’s co-founder, sent an email to Randy Robertson at BlackRock. This message read, "Randy hope all is well. [¶] We have a fee agreement with Bill Sadle[i]r based upon monies raised from Blackrock thru my introduction to you. What can you do to assist us here in collecting what is due to us. [¶] Jesse [Kennedy, of Medallion] will provide a reconciliation. As you know our financial models were provided to you and Blackrock on the P&A. [¶] Let us know so we don[’]t have to litigate and can resolve the matter in an amicable fashion. [¶] Thx."

Loeb & Loeb learned of the Quraishi email request to Robertson. On March 28, 2018, Loeb & Loeb partner Bernard Given II wrote a letter to Quraishi and Kennedy on behalf of Aviron Capital. Given described Quraishi’s email to Robertson as a threat of legal action, and wrote, "Aviron has no legal connection to Clarius Capital Group, LLC whatsoever. It is not a successor in interest and there is no common ownership between the two companies. Mr. Sadleir, who signed the referenced agreement on behalf of Clarius Capital Group, is an Aviron employee with no ownership interest in Aviron. Had Mr. Sadleir left Clarius to work at Sony Pictures Entertainment, for example, your claim for payment to you by Sony, had it received funding from BlackRock, would be equally without merit. [¶] Any further communication by you to Randy Robertson or anyone else at BlackRock regarding this matter will be considered by Aviron to constitute tortious interference."

Plaintiffs allege Given knew these representations were false when he made them because Loeb & Loeb had assisted in the formation of the Aviron entities, registered several of them on Sadleir’s behalf, advised Sadleir with respect to Aviron and Clarius, and represented Aviron when it obtained funding from BlackRock in 2015. Plaintiffs allege Given intended for Medallion Film and Pelican Point to rely on his false representations to conclude they were not entitled to payment under their agreement with Clarius.

Plaintiffs allege they believed Given’s representations that Aviron and Clarius were unaffiliated, Sadleir was merely an Aviron employee, and they were not entitled to payment based on the agreement. However, in December 2019, they learned, from documents related to litigation between BlackRock and Sadleir/Aviron, that Given’s representations were false.

Plaintiffs sued Loeb & Loeb in December 2021. The first amended complaint alleges causes of action for fraudulent misrepresentation, deceit by concealment, negligent misrepresentation, aiding and abetting fraud, and violating California Business and Professions Code section 17200.² The plaintiffs attached to the first amended complaint, inter alia, the following documents:

--The 2014 consulting agreement between plaintiffs and Clarius;

--The Second Amended and Restated Limited Liability Company Agreement of Aviron Group, alleged to be the parent company of the Aviron entities, revising Sadleir’s ownership from 100 percent down to 10 percent of the company, with Temerity Trust Management (of which Sadleir was identified as manager) owning 80 percent and a BlackRock subsidiary owning the remaining 10 percent;

--Limited liability company agreements for two Aviron subsidiaries, each providing Aviron Group owned the company in its entirety and that Sadleir would control and manage all the company’s business affairs as manager;

--The October 2015 Credit and Security Agreement between BlackRock and Aviron Capital, specifying that one of the conditions precedent to the effectiveness of the agreement was "a favorable opinion of Loeb & Loeb LLP, counsel to the Loan Parties," and requiring correspondence to Aviron to be copied to the firm;

--The agreement extending the BlackRock credit arrangement in 2017, specifying as a condition precedent a favorable opinion from Loeb & Loeb, counsel for Aviron entities and/or subsidiaries;

--An Equity Pledge Agreement signed in October 2015 by Sadleir, as president of Aviron Group, pledging Aviron Group’s equity interests in subsidiaries Aviron Capital and Aviron Pictures as collateral for the funding agreement with BlackRock;

--A 2017 omnibus amendment to Aviron’s agreement with BlackRock, signed by Sadleir as manager of Aviron Pictures and MAA Releasing and president of Aviron Group;

--Two 2019 agreements to advance funds to Aviron Capital against the credit extended by BlackRock, signed by Sadleir as manager of Aviron Capital and Temerity Trust Management, and pledging Sadleir’s personal interest and Temerity Trust’s interest in Aviron Group as collateral;

--Executive summaries for Aviron Pictures and Clarius, in which Sadleir is identified as chairman, the companies’ business models are described in similar terms, and a number of management personnel are the same for both companies;

--2015 letters to Loeb & Loeb confirming the good standing of two Aviron subsidiaries;

--A 2017 California Application to Register a Foreign Limited Liability Company filed for an Aviron company by a person alleged to be a Loeb & Loeb paralegal;

--The December 2019 complaint by BlackRock against Sadleir and the Aviron entities in New York, describing the Aviron entities’ structure, ownership, control, and agreements with BlackRock;

--A 2019 preliminary injunction in the BlackRock litigation, prohibiting Sadleir and the Aviron entities from holding themselves out as manager of, or controlling, or purporting to control, the operations of Aviron Capital and Aviron Pictures;

--BlackRock’s 2020 amended complaint alleging Sadleir had created a sham entity and used it to siphon millions of dollars from BlackRock’s Multi-Sector Income Trust for his personal use in an elaborate fraud; and

--A text message asserted to have been sent in January 2020 by Sadleir to an officer at Medallion, in which Sadleir confirmed he still owned the Aviron entities in their entirety.

I. The Anti-SLAPP Motion

Loeb & Loeb filed a special motion to strike the first amended complaint as a strategic lawsuit against public participation under section 425.16 (an "anti-SLAPP" motion). Loeb & Loeb claimed the plaintiffs’ causes of action were all based on the representations in Given’s letter, and they arose from protected activity because the letter had been "sent in express response to Plaintiffs’ threat of legal action to recover amounts purportedly due under the Consulting Fee Agreement, and therefore in connection with a contemplated lawsuit."

Loeb & Loeb argued plaintiffs could not establish a probability of success on their claims. First, Loeb & Loeb asserted the litigation privilege provided an absolute defense to all of the causes of action because Given’s letter was sent "in direct response to Quraishi’s email threatening legal action," with the belief that plaintiffs "were actually contemplating litigation, seriously and in good faith," and the alleged misrepresentations related to plaintiffs’ "anticipated claims for fees." Second, Loeb & Loeb contended the causes of action were barred by the three-year statute of limitations. Even applying the discovery rule, because plaintiffs suspected in 2018 that Sadleir controlled Aviron, plaintiffs were obligated to investigate. Their investigation was "minimal at best," as they only contacted Sadleir and BlackRock, then stopped inquiring about payment upon receiving Sadleir’s denial and Given’s letter. This, Loeb & Loeb claimed, was not reasonable diligence as a...