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	Failure to Maintain: Is There Light At the End of The Tunnel? Business  By Arthur Grebow Failure to maintain actions continue to proliferate in California. The typical complaint filed in each case is identical to the complaint filed in every other case. It is a boilerplate pleading containing fourteen causes of action ranging from breach of the Mobilehome Residency Law to Unfair Business Practices. The complaint contains a long laundry list of every possible defect that could possibly occur in any mobilehome park. There is little attempt to connect the alleged defects to either the park in general or to the plaintiffs specifically. From the perspective of the plaintiffs’ attorneys it is a numbers game. The more plaintiffs or spaces involved, the higher the settlement demand. The actual merits of each plaintiff’s claims are of no importance to the ultimate resolution. It is of no consequence if a defendant could not be liable under the great majority of the causes of action or even if a plaintiff testifies that he has “no complaints” against the parkowner since there were no adverse consequences to the plaintiffs or to their attorneys. On December 17, 2007, the Court of Appeal in San Diego took a large step to level the playing field when it decided the case of Sycamore Ridge Apartments LLC v. Naumann. The Facts 1. The Pleadings This article appeared in the California Mobilehome Parkowners Alliance Winter 2008 newsletter. Sycamore Ridge is an apartment complex located in San Diego County. In 2002, a tenant contacted the law firm of Naumann & Levine (Naumann) complaining about conditions. An inspection disclosed high airborne readings of aspergillus/pencilium spores, maintenance deficiencies, roof leaks, vermin infestation and flying termites. On December 12, 2002 the Naumann attorneys sent unsolicited letters to present and past tenants of Sycamore Ridge informing them about complaints of health problems that some of the tenants had suffered. Included with the letter was a contingency fee agreement to be signed and returned by those tenants who wished to participate in a future lawsuit. Powell, one of the tenants, signed and returned the retainer agreement. She told the attorneys about symptoms that she allegedly suffered while living at Sycamore Ridge including sinus congestion, watery and itchy eyes, headaches and fatigue, heating problems in her apartment and the fact that she believed that the owners unfairly retained her security deposit. In June 2003 the Naumann attorneys filed a complaint against Sycamore Ridge on behalf of 45 individual tenants, including Powell. The complaint set forth 18 causes of action arising out of unfair business practices and allegations of poor living conditions at the complex. All plaintiffs were named as complainants in all 18 counts. The total damages alleged in the complaint on behalf of the plaintiffs, as a group, exceeded $4 million. 2. Discovery Disclosures In response to interrogatories from the defendants, Powell denied that she attributed any physical injuries, property damages, lost earnings or future lost earnings to defendants’ acts. She answered vaguely that she felt that the apartment “was unsuitable to live in.” When the defendants attempted on two occasions to take Powell’s deposition, she refused to appear. In December 2003 the Naumann attorneys filed a statement of damages on behalf of Powell asserting that she suffered $20,000 in emotional distress damages, $2,000 in property damages, and $50,000 in punitive damages. On September 16, 2004 the law firm of LaFave & Rice (LaFave) became co-counsel with Naumann. On November 19, 2004, Powell voluntarily dismissed her claims without prejudice. After receiving a letter from defense counsel offering to waive costs if Powell would agree that the dismissal be with prejudice, the Naumann attorneys filed a dismissal with prejudice on January 20, 2005. 3. Sycamore Ridge Files a Malicious Prosecution Action Against the Defendants Sycamore Ridge filed a malicious prosecution complaint against Naumann and LaFave on September 9, 2005. (There is a twenty-year statute of limitations to file a malicious prosecution case.) It alleged that the attorneys had filed and prosecuted Powell’s claims without probable cause, and that the defendants had maintained Powell’s portion of the lawsuit in bad faith and with malice. Powell’s response was to file a motion to strike under the anti-SLAPP statute. Under the anti-SLAPP statute (Code of Civil Procedure section 425.16) a cause of action against a person arising from an act of that person in furtherance of the person’s right of petition or free speech, under the United States or California Constitution in connection with a public issue, shall be stricken unless the court determines that the plaintiff has established that there is a probability that it will prevail on the claim. The Court of Appeal agreed with the trial court that the claim arose from a protected activity. However, it decided that Sycamore Ridge demonstrated a probability of prevailing on its malicious prosecution claim against both law firms. Decision of the Court of Appeal To establish a claim for malicious prosecution Sycamore Ridge had to plead and prove that the prior action (1) was commenced at the direction of the attorneys and was pursued to a legal termination in its favor; (2) was brought without probable cause; and (3) was initiated with malice. 1. Favorable Termination Naumann & Levine argued that the voluntary dismissal should not be considered a favorable termination. The Court noted that the trial court found that Sycamore Ridge offered evidence that reasonably suggested that the dismissal occurred because Powell’s claims lacked merit, including the fact that she failed to appear at two depositions and submitted interrogatory answers that she incurred no damages other than emotional distress after having filed a complaint with 18 causes of action alleging physical injury and property damage. The Court agreed that the dismissal permitted the reasonable inference that the claims of mold infestation were groundless. 2. Lack of Probable Cause In affirming the decision of the trial court, the Court of Appeal made the following comments that are relevant to failure to maintain actions: “Despite the very limited complaints Powell discussed with the Naumann attorneys, the Naumann defendants alleged 18 different causes of action on her behalf – the great majority of which had nothing do with any of the concerns Powell had discussed with them. Under these circumstances, it is difficult to conclude that a reasonable attorney would have believed that Powell had tenable claims under many of the causes of action alleged in the complaint as filed.” The Court noted that fifteen of the causes of action were totally inapplicable to Powell’s circumstances. The Court also affirmed the trial court’s decision to allow Sycamore Ridge to proceed against LaFave. Before agreeing to become attorney of record, they should have made a preliminary determination whether probable cause existed to support the asserted claims. 3. Malice The Court also agreed that there was evidence to support the requirement of malice. There was testimony “that would support the conclusion that the proceedings were initiated and maintained in order to force Sycamore Ridge to enter into a settlement unrelated to the merits of Powell’s claims.” The Naumann attorneys appear to have employed a “shotgun” approach from the outset of the litigation without employing any reasonable investigation. “Maintaining a case one knows, or should know, is untenable continues to harm the defendant as long as the cause remains open, since the defendant must continue to prepare a defense to the case as long as the case appears to be moving forward.” 4. Damages Finally, the Court found that there was sufficient evidence to support Sycamore Ridge’s assertions that it suffered damages as a result of Powell’s claims. A plaintiff who successfully asserts a malicious prosecution claim can obtain reasonable attorney fees incurred defending the prior action, and may also recover compensation for injury to reputation or impairment of social and business standing in the community. Punitive damages may also be awarded. Implications This case places a two-fold burden on plaintiff attorneys. It disapproves of multi-party, multi-cause of action complaints that are, as the Court put it, “shotgun” in nature. It compels plaintiff attorneys to thoroughly investigate each claim before the lawsuit is filed and proceed only with the good faith belief that the causes of action in the complaint have evidentiary support. It further compels plaintiff’s attorneys to dismiss causes of action that discovery reveals are unsupported. We anticipate that this case will go a long way toward insuring that frivolous, unsupported failure to maintain cases are not filed. This article appeared in the California Mobilehome Parkowners Alliance Winter 2008 newsletter. Back
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