When I first read Art Works Studio & Classroom, LLC v. Leonian (D2d7 Apr. 12, 2022 no. B304461) 2022 WL 1090984 (nonpub. opn.), something seemed odd about it. I had to read it again to be sure: it is definitely odd.
The factual setup is not that odd. It is a commercial lease dispute. The tenant was upset about how some estoppel certificates were drafted. You see, as part of its efforts to sell the building, the landlord prepared estoppel certificates to give to the buyer. The certificates stated the lease was up in 2018, when in fact the landlord well knew the tenant had already exercised its five-year option to 2023. But the tenant did not catch this when completing and signing the estoppel certificates. So when the landlord sent a 30-day notice to quit based on the estoppel certificates, the tenant sued to enforce its option right.
The landlord filed an anti-SLAPP motion, arguing the tenant’s suit arose from the 30-day notice, which the landlord argued is protected conduct. (Comment: Come on.) The trial court granted the anti-SLAPP. The court also awarded landlord its attorney fees. Tenant appealed.
While the appeal was pending, landlord filed a UD action. This action, too, was based on the same estoppel certificates. The trial court granted landlord’s motion for summary judgment.
To take stock so far: There is an appeal of an anti-SLAPP order where the tenant claims there was at least minimal merit for its interpretation of the estoppel certificates. And there is a judgment that ultimately rejected tenant’s interpretation.
So you can guess what the landlord did next: The landlord moved to dismiss the appeal as barred by res judicata based on the UD judgment. And the Court of Appeal agreed. “Because these issues were fully litigated in the unlawful detainer actions, appellants are barred from relitigating these issues.”
Now here is the odd part. The Court of Appeal has granted the landlord’s motion to dismiss the appeal. So that means what happens next is the appeal is dismissed and the anti-SLAPP order is affirmed, right?
But that’s not what happened. The court did not want to affirm the judgment. So it did not dismiss the appeal. “Because dismissing the appeal as moot would constitute an affirmance, we have elected to reverse with directions.” The court’s directions: “We reverse the order granting the anti-SLAPP motion and remand the matter to the trial court to vacate the order as well as the derivative order awarding attorneys’ fees.”
In other words: The respondent landlord loses.
This is the part where you probably feel the need to go back to the beginning and find out what you missed. Because you have never heard of a respondent winning its motion to dismiss an appeal, and losing the appeal. Yet that is what happened here. When the Court of Appeal agreed with the landlord that the appeal was moot, the end result was the anti-SLAPP ruling and fee award for the landlord were both reversed.
How did this happen?
Here is what I think is going on here:
First, note that the landlord was not technically correct when it argued the issues in the UD judgment “are the same issues raised in the civil action (and in this appeal).” Remember that, on an anti-SLAPP motion, the plaintiff does not need to prove its claims by a preponderance standard. All the plaintiff has to show is “minimal merit.” So the UD judgment against the tenant had no effect on tenant’s appeal: it is quite possible that tenant’s claims had “minimal merit” even if they did not have ultimate merit.
So, no, the UD judgment did not technically render the anti-SLAPP appeal moot.
(But on this point, the court correctly noted that tenant rendered its appeal moot when it voluntarily vacated the premises. This is one reason UD appeals are so difficult: the possession issue becomes moot unless the tenant can get a stay, and stays require a showing of “extreme hardship.” (Code Civ. Proc., § 1176.))
Second, the Court of Appeal did not want to deal with the SLAPP issues. The court specifically said it would not reach the first prong, whether the tenant’s lawsuit arose from protected activity, “because irrespective of the outcome appellants would not be afforded any meaningful relief in the trial court.” Which is true: even if the tenant won on prong one, prong two, or both, tenant’s lawsuit was moribund because of the UD judgment.
Still, I suspect the Court of Appeal thought it was a little sharp of the landlord to slip out of the option the way it did, and did not relish the thought that the landlord, who would already recover its costs in the UD action, should also recover fees in the tenant’s action. So by reversing, the tenant will now be able to dismiss its action without attorney-fee exposure. (Civ. Code, § 1717(b)(2) [“Where an action has been voluntarily dismissed or dismissed pursuant to a settlement of the case, there shall be no prevailing party for purposes of this section.”].)
But this seems a really circuitous way to go about it.
