Peterson v. Mojdehi

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KIM PETERSON et al., Plaintiffs and Respondents, v. ALI M.M. MOJDEHI et al., Defendants and Appellants.

D078461

California Court of Appeals, Fourth District, First Division

September 27, 2022

NOT TO BE PUBLISHED

APPEAL from an order of the Superior Court of San Diego County No 37-2020-00024427-CU-PN-CTL, Timothy B. Taylor, Judge. Affirmed in part, reversed in part, and remanded with directions.

White &Amundson and Steven G. Amundson for Defendant and Appellant Ali M.M. Mojdehi.

Pettit Kohn Ingrassia Lutz &Dolin, Douglas A. Pettit, Matthew C Smith, Jennifer N. Lutz and Caitlin M. Jones for Defendant and Appellant Barnes &Thornburg LLP.

TencerSherman, Philip C. Tencer and Corrin M. Johnson for Plaintiffs and Respondents.

IRION ACTING P. J.

Kim Peterson and Kim Funding, LLC, a company Peterson manages sued Ali M.M. Mojdehi and his law firm for professional negligence and breach of fiduciary duty. Peterson and Kim Funding alleged that Mojdehi used in later business dealings with others confidential information Mojdehi had learned while he represented Peterson, represented in a bankruptcy case clients with interests adverse to those of Peterson and Kim Funding, and harmed Peterson's reputation. Mojdehi and his law firm filed a special motion to strike the complaint as a strategic lawsuit against public participation (SLAPP) on the grounds it arose from protected litigation activity and lacked merit. The trial court ruled the action arose from breaches of professional obligations, not litigation in the bankruptcy case, and denied the motion. We conclude Mojdehi and his law firm met their burden to show the action arose, in part, from protected litigation activity and Peterson and Kim Funding did not meet their burden to show the action had merit to the extent it arose from that activity. We therefore affirm in part and reverse in part the trial court's order.

I. BACKGROUND

A. Peterson's Relationship with Mojdehi

Peterson and Mojdehi became friends in 2006 when they served together on the board of trustees of the school their children attended. From 2012 through 2014, while Mojdehi was a partner at the law firm of Cooley LLP, Peterson hired Mojdehi to represent Kim Media LLC, a company Peterson managed, in several bankruptcy matters. Peterson and Mojdehi signed an engagement agreement for this representation. Mojdehi also did legal work for Peterson in 2012 on a personal loan he had made to an entity that later filed for bankruptcy. Peterson paid Cooley approximately $118,000 for this work.

B. The Liquor License Lending Platform

In April 2014, Peterson formed Kim Funding LLC for the sole purpose of providing capital to a lending platform for liquor license applicants. Peterson owned 99 percent of Kim Funding and was its sole manager. In August 2014, he contacted Mojdehi about the platform and shared confidential information about his stake in the platform and the language of the escrow agreements used in the lending process. Peterson also requested advice on whether Kim Funding would be able to retrieve loan funds it had put in escrow if the borrowing liquor license applicant were to file for bankruptcy. Another attorney at Cooley responded to the inquiry by e-mail to Peterson, with a copy to Mojdehi, and suggested certain language be included in the escrow agreement so that Kim Funding could retrieve the loan funds if the borrower filed for bankruptcy. Mojdehi did not provide Peterson an engagement agreement for this work.

Between December 2015 and July 2019, two companies owned or managed by members of Mojdehi's family, L'Audace, LLC, and ABPS, LLC, loaned a total of $7,750,000 to Kim Funding for investment in the liquor license lending platform. At the request of his son, Mojdehi reviewed the loan documents sent by Peterson and suggested changes. Peterson personally guaranteed the loans.

Mojdehi left Cooley and joined Barnes &Thornburg LLP in April 2018. Between August 2018 and June 2019, Mojdehi himself loaned a total of $475,000 from a retirement account to Kim Funding for investment in the liquor license lending platform. Peterson personally guaranteed the loans. After joining Barnes &Thornburg, Mojdehi also provided Peterson legal advice on an oil company restructuring deal that was never completed. Barnes &Thornburg did not enter into a retainer agreement with Peterson or Kim Funding and did not bill either for any services.

In August 2019, Peterson and Mojdehi learned the liquor license lending platform was a Ponzi scheme and its founder had been charged with securities fraud. The Securities and Exchange Commission later froze all platform assets and ordered a receiver to conduct an accounting. Mojdehi repeatedly demanded additional security from Peterson and threatened to force him and Kim Funding into bankruptcy if he did not agree to the demands.

C. The Involuntary Bankruptcy Petitions

In September 2019, L'Audace, LLC, ABPS, LLC, and other entities that had loaned money to Kim Funding for investment in the liquor licensing lending platform filed involuntary petitions against Peterson and Kim Funding in the United States Bankruptcy Court for the Southern District of California. Mojdehi and Barnes &Thornburg represented the petitioners. On joint motions of Peterson, Kim Funding, and the petitioning creditors, the bankruptcy court dismissed the petitions in February 2020.

D. The State Court Litigation

In July 2020, Peterson and Kim Funding (hereafter collectively Peterson) filed a complaint against Mojdehi and Barnes &Thornburg (hereafter collectively Mojdehi) in the superior court for professional negligence and breach of fiduciary duty. Peterson alleged Mojdehi breached the standard of care and attorney-client ethical obligations when, without first making the required disclosures and obtaining informed consent and waivers of conflicts of interest, Mojdehi used confidential information he had learned while representing Peterson for the financial benefit of himself and family members and for the benefit of the petitioning creditors in the involuntary bankruptcy proceedings. Peterson alleged the bankruptcy petitions were frivolous and were maliciously filed to harm him. Peterson further alleged Mojdehi and his son repeatedly attacked Peterson's character and reputation in telephone calls to a co-plaintiff in Peterson's lawsuit against the escrow company involved in the liquor license lending platform, and urged the co-plaintiff to drop out of that lawsuit and to join the one that L'Audace, LLC, ABPS, LLC, and others had filed against the escrow company and Peterson. Peterson complained Mojdehi's breaches of the standard of care and fiduciary duties caused him to incur expenses to defend the bankruptcy proceedings, to lose a favorable business opportunity due to the negative impact of the proceedings on his credit report, and to suffer harm to his reputation. For relief, Peterson sought to recover the attorney fees he incurred in the involuntary bankruptcy proceedings; damages for the lost business opportunity and the harm to his credit and business reputation; damages for injury to his reputation in the financial and business community; disgorgement of attorney fees collected by Mojdehi while he had conflicts of interest and committed gross ethical misconduct; indemnity for any liability to which Peterson may be exposed as a result of Mojdehi's conflicts of interest and unethical conduct; punitive damages; interest; and costs.

Mojdehi filed an anti-SLAPP motion against the entire complaint. (Code Civ. Proc., § 425.16.) He argued the claims for professional negligence and breach of fiduciary duty arose from constitutionally protected petitioning activity because the filing of the involuntary bankruptcy petitions was the "principal activity" of which Peterson complained and the "primary source" of the alleged damages. Mojdehi further argued Peterson could not prevail on the claims because he could not establish essential elements, including an agreement to represent him in connection with the liquor license lending platform, and the claims were barred by the litigation privilege (Civ. Code, § 47, subd. (b)) and the Bankruptcy Code (11 U.S.C. § 303(i)). In support of the motion, Mojdehi submitted a declaration describing his relationship with Peterson and his (Mojdehi's) and his family's involvement in the liquor license lending platform, the involuntary bankruptcy petitions, and other litigation related to the platform.

In opposition to the motion, Peterson argued the complaint was not subject to the anti-SLAPP statute, because it was based on legal malpractice and breaches of fiduciary duties, not on the filing of the involuntary bankruptcy petitions, although he conceded "protected litigation activity feature[d] prominently in the factual background." Peterson further argued he could establish the essential elements of his claims and they were not barred by the litigation privilege or the Bankruptcy Code. As part of the opposition, Peterson submitted his own declaration describing his relationship with Mojdehi and involvement in the liquor license lending platform and the involuntary bankruptcy proceedings. Peterson also submitted a declaration from an experienced bankruptcy lawyer, who expressed opinions that Mojdehi breached his duty of loyalty to Peterson by representing clients with interests adverse to Peterson's in connection with the liquor license lending platform, that Mojdehi's conflicts of interest were imputed to Barnes &Thornburg, and that the Bankruptcy Code did not preempt Peterson's claims for breach of duties owed to him as a former client of Mojdehi.

The trial court denied the anti-SLAPP motion. The court ruled Mojdehi did not meet his burden to show the...