Fraley v. Ford Serviss LLP CA2/5

Filed 5/6/22 Fraley v. Ford Serviss LLP 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NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FIVE

FRANKLIN R. FRALEY, JR., B309029 c/w B310525
(Los Angeles County
Plaintiff and Appellant, Super. Ct. No.
20STCV02956)
v.

FORD SERVISS LLP, et al.,

Defendants and Respondents.

APPEALS from an order and judgement of the Superior
Court of the County of Los Angeles, Laura A. Seigle, Judge.
Reversed, in part, and remanded with instructions.
The David Firm, Henry S. David and Hayim M. Gamzo, for
Plaintiff and Appellant.
Kaufman Dolowich & Voluck, Andrew J. Waxler and
Jordan G. Cohen, for Defendants and Respondents.
Beitchman & Zekian, David P. Beitchman and Andre
Boniadi, for Defendants and Respondents.
 I. INTRODUCTION

Plaintiff Franklin Fraley, Jr. (Fraley) sued the attorney
defendants1 for impairing his attorney lien against settlement
proceeds. The trial court granted defendants’ anti-SLAPP
motion,2 struck the entire complaint, and awarded defendants
attorney fees and costs. On appeal, Fraley contends that
defendants failed to satisfy their burden to show that all of the
alleged wrongful conduct underlying the complaint was protected
activity and that, in any event, he showed the requisite
probability that he would prevail on his claims. We reverse, in
part, and remand with instructions.

II. FACTUAL BACKGROUND

A. Kessler’s Retention of Fraley

In February 2007, Fraley (dba Fraley & Associates) entered
into a retainer agreement with Drita Kessler and her company,
DK Art Publishing, Inc. (collectively Kessler), pursuant to which
Fraley agreed to provide Kessler legal services on various

1 The defendants are three law firms—Ford Serviss, LLP,
Collins Ford, LP, and Beitchman & Zekian—and four individual
attorneys—William H. Ford III, Claudia J. Serviss, Michael D.
Collins, and David P. Beitchman.

2 The term “SLAPP” is an acronym for strategic lawsuit
against public participation. (Barrett v. Rosenthal (2006) 40
Cal.4th 33, 40.) Defendants filed their motion under Code of
Civil Procedure section 425.16 (section 425.16), commonly known
as the anti-SLAPP statute.

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matters. The agreement provided that Fraley’s services would be
billed on an hourly basis and that Kessler would be invoiced
monthly. The agreement included an arbitration clause
applicable to any and all disputes between the parties arising
under the agreement and a prevailing-party attorney fees
provision.
According to Fraley, soon after he began representing
Kessler, she advised that she could not pay his monthly invoices
when due. The parties therefore agreed that she would pay the
overdue invoices from the proceeds she received on then-pending
matters. As a result, Fraley represented Kessler for years
without receiving any compensation from her.

B. The City Art Action3

In May 2007, Fraley filed an action for Kessler against City
Art, Inc. and others (collectively City Art) seeking damages and
other relief “for conversion of [DK Art Publishing, Inc.’s] art.”
After litigating that action for nearly seven years, Fraley
obtained a judgment in favor of Kessler entitling her to more
than $8 million in damages for lost or stolen art and repossession
of approximately $5 million in consigned art.

C. Coverage Action and Assignment of Rights

City Art tendered the defense of the City Art action to
Travelers Property and Casualty Company of America and
Fidelity Guarantee Insurance Underwriters, Inc. (collectively

3 DK Art Publishing, Inc., et al. v. City Art, Inc., et al. (LASC
case number BC370549).

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Travelers) both of which initially denied coverage, but later
agreed to defend the action under a reservation of rights. City
Art then sued Travelers seeking a declaration of rights regarding
Travelers’ defense and indemnity obligations and damages for
insurance bad faith (coverage action).4
Following entry of the judgment in the City Art action,
Kessler and City Art entered into an agreement not to execute on
the judgment in exchange for an assignment of City Art’s rights
against Travelers in the coverage action. Following the
assignment of rights, Kessler retained defendants to represent
her in the coverage action.

D. Coverage Action Lien and Termination

On October 29, 2013, Fraley filed a notice of attorney lien
in the coverage action. The notice described Fraley’s rights under
the retainer agreement to be paid all proceeds due to Kessler
from matters on which he represented her5 and his lien rights
with respect to all such proceeds. A dispute then arose between
Fraley and Kessler over the amount of attorney fees due and
Fraley’s lien rights to the proceeds from the City Art, coverage,
and malpractice actions. In the fourth quarter of 2014, Kessler

4 City Art, Inc., et al. v. Travelers Property and Casualty Co.
of America, et al. (LASC case number BC445179).

5 In addition to representing Kessler in the City Art action,
Fraley also filed a notice of judgment lien on Kessler’s behalf in a
legal malpractice action filed by City Arts against its former
attorney (malpractice action), entitled City Art, Inc. et al. v.
Azadegan et al. (LASC case number BC476405).

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terminated Fraley’s services in relation to all matters on which
he represented her under the retainer agreement.
In late 2014, Fraley notified defendants that the total
amount of his lien was $1,870,281.07 in principal and
$1,391,097.41 in interest.

E. Settlement of the Coverage Action

In January 2015, Kessler agreed to settle the coverage
action with Travelers. In exchange for a release of all claims
against Travelers and a dismissal of the coverage action,
Travelers agreed to pay Kessler $6,460,000. The agreement
provided that Travelers would make payment of the settlement
amount as follows: (1) $5,160,000 would be paid to defendant
“Ford & Serviss LLP;” (2) $1.3 million would be deposited in an
escrow account designated by Kessler; and (3) $500,000 would be
deposited by Kessler in the same escrow account from the
anticipated settlement of the malpractice action. The agreement
further provided that the “first moneys” from the escrow account
would be used to satisfy Fraley’s lien, the amount and validity of
which remained undetermined. Any funds left over after the
extinguishment of Fraley’s lien were to be paid to Kessler.
Kessler agreed to be responsible for the amount of the Fraley lien
and to hold Travelers harmless from any obligations arising from
the lien.
In February 2015, pursuant to the terms of the coverage
action settlement, defendants received a total of $5,160,000 from
Travelers. From that amount, they paid themselves $1,660,000.
In mid-March 2015, Fraley learned that the coverage action had
been dismissed and suspected that it had settled. Approximately

5
one month later, on April 15, 2015, defendants disbursed the
remaining $3,469,214.50 to Kessler. Defendants did not,
however, notify Fraley that the coverage action had settled or
that any money had been disbursed.

F. Collection Action Against Kessler

In April 2016, Fraley initiated an arbitration proceeding
against Kessler to recover amounts due under the retainer
agreement. On September 6, 2017, the arbitrator issued an
interim award in favor of Fraley for unpaid legal fees and costs
incurred on Kessler matters in the amount of $1,868,179.85 and
pre-award interest from February 13, 2015, through
May 31, 2017, in the amount of $772,044.51, for a total interim
award of $2,640,224.36. On September 14, 2017, Fraley received
$1,299,990 from defendants, i.e., the amount that had been
escrowed under the coverage action settlement to satisfy Fraley’s
lien (less a $10 wire transfer charge).
On January 23, 2018, the arbitrator issued a final award
which added to the interim award $1,113,899.94 in attorney fees
and costs incurred in the collection action and $52,490 in costs
associated with arbitration. The final award also gave Kessler a
$1,299,990 credit for the amount received by Fraley from the
escrowed coverage settlement proceeds.
On May 8, 2018, Fraley petitioned the trial court to confirm
the arbitration award, and on July 9, 2018, the court entered a
judgment in favor of Fraley that confirmed the final award, and
added to it additional prejudgment interest and attorney fees, for
a total damage award against Kessler of $2,921,413.41. The
judgment also granted Fraley declaratory relief, including

6
declarations that Fraley’s attorney lien was valid and enforceable
and applied to, among other matters, the proceeds from the
coverage action settlement and the malpractice action settlement.

III. PROCEDURAL BACKGROUND

A. The Instant Action

On January 22, 2020, Fraley filed his complaint against
defendants, asserting four causes of action: (1) conversion;
(2) intentional interference with contract; (3) intentional
interference with prospective economic advantage; and (4) aiding
and abetting fraudulent transfers. Each cause of action was
based on the same five alleged acts by defendants:
“a. enabling [Kessler] to enter into the [coverage action
settlement] without regard to [Fraley’s l]ien against the [coverage
action s]ettlement [p]roceeds and without compensating [Fraley]
for [his] services in violation of [his l]ien;
“b. taking possession, custody, and control of the
[coverage action s]ettlement [p]roceeds without regard to
[Fraley’s l]ien against [those p]roceeds and without compensating
[Fraley] for [his] services in violation of [his l]ien;
“c. distributing substantial portions of the [coverage
action s]ettlement [p]roceeds to [Kessler] and to [defendants]
without regard to [Fraley’s l]ien against [those p]roceeds and
without compensating [Fraley] for [his] services in violation of
[his l]ien;
“d. failing to hold or deliver to [Fraley] a sufficient
amount from the [coverage s]ettlement [p]roceeds to discharge
[Fraley’s l]ien in full, which enabled [Kessler] and[/or defendants]

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to use and/or further transfer the [coverage action s]ettlement
[p]roceeds without compensating [Fraley] for [his] services in
violation of [his l]ien; and/or
“e. obtaining more favorable terms for the [coverage
action s]ettlement, including, but not limited to, reducing the
settlement amount in exchange for circumventing [Fraley’s l]ien
against the [coverage action s]ettlement [p]roceeds, all without
[Fraley’s] consent and contrary to [Fraley’s l]ien against the
[coverage action s]ettlement [p]roceeds.”

B. Anti-SLAPP Motion

On April 29, 2020, defendants filed a special motion to
strike the entire complaint under section 425.16. Defendants’
notice of motion advised that “[t]his [m]otion is made on the
ground, among others, that the gravamen or principle thrust of
the [c]omplaint[] is premised entirely on [d]efendants’ exercise of
the ‘right of petition or free speech’ in connection with [the]
settlement of a lawsuit and [the] distribution of the settlement
funds to [Kessler].” (Italics added.)
Defendants argued that the trial court must “examine the
principal thrust or gravamen of a plaintiff’s cause of action” and
“the principal thrust of each cause of action is that [defendants]
deprived Fraley of the proceeds from the [c]overage [a]ction by
settling [that action] and disbursing the settlement funds.”
Defendants listed the five acts by defendants that allegedly
supported liability on each cause of action and concluded that
those “activities all undisputedly all [arose] from protected
activity. Thus, . . . [d]efendants have satisfied their burden on
prong one.”

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 On the issue of whether Fraley could show a probability of
prevailing on his claims, defendants argued, among other things,
that the litigation privilege in Civil Code section 47,
subdivision (b), barred each of Fraley’s claims.
Fraley opposed the motion arguing, as relevant on appeal,
that the gravamen of his claims against defendants was not their
statements made during the coverage action settlement
negotiations, but rather their separate conduct in disbursing the
settlement funds after the coverage action was dismissed.
Because that disbursement was independent conduct that was
not protected activity under the anti-SLAPP statute, Fraley
maintained that defendants had failed to carry their burden
under the first prong of that statute. As to prong two, Fraley
argued that he could establish a prima facie case for his causes of
action and that the litigation privilege did not apply to the
impairment of attorney liens.

C. Trial Court’s Ruling

On September 4, 2020, the trial court held a hearing on
defendants’ motion and took the matter under submission. On
September 11, 2020, the court issued a final ruling granting the
motion and finding that the protected activity—negotiation of the
settlement agreement—was “at the heart of [Fraley’s] claims.”
According to the court, the allegations concerning the
disbursement of the settlement funds without reserving sufficient
amounts to cover Fraley’s lien “would not have been possible
without the negotiation, drafting, and execution of the [coverage
action] settlement agreement. Thus, the settlement agreement is
not ‘merely “incidental”’ to the wrongful conduct. [Citation.] The

9
entry into, and the effectuation of, the settlement agreement form
‘the fundamental factual basis for the claim[s].’” [Citation.]”
On Fraley’s probability of prevailing on his claims, the trial
court found, among other things, that Fraley’s “claims based on
[defendants’] negotiating, drafting, and executing the settlement
agreement [were] protected by the litigation privilege.” The court
granted the special motion to strike the entire complaint.
Following the order striking the complaint, Fraley filed a
November 9, 2020, notice of appeal from the trial court’s order
granting the special motion to strike and defendants’ respective
memoranda of costs.
On October 9, 2020, defendants6 filed a motion for an
award of attorney fees, and the trial court granted the motion,
awarding defendants costs and $75,651.50 in attorney fees. On
December 29, 2020, the court entered a judgment in favor of
defendants on the orders granting the special motion to strike
and awarding fees and costs. Fraley timely appealed from the
judgment and we consolidated that appeal with his earlier appeal
from the order striking the complaint.

IV. DISCUSSION

A. The Anti-SLAPP Procedure

“[The anti-SLAPP] statute authorizes a special motion to
strike a claim “arising from any act . . . in furtherance of the
[plaintiff’s] right of petition or free speech under the United
States Constitution or the California Constitution in connection

6 Defendants Beitchman & Zekian and David Beitchman did
not file a fee motion.

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with a public issue.” (§ 425.16, subd. (b)(1).)’ (Wilson [v. Cable
News Network, Inc. (2019)] 7 Cal.5th [871,] 883–884.) [¶]
Litigation of an anti-SLAPP motion involves a two-step process.
First, ‘the moving defendant bears the burden of establishing
that the challenged allegations or claims “aris[e] from” protected
activity in which the defendant has engaged.’ (Park [v. Board of
Trustees of California State University (2017)] 2 Cal.5th [1057,]
1061.) Second, for each claim that does arise from protected
activity, the plaintiff must show the claim has ‘at least “minimal
merit.’” (Ibid.) If the plaintiff cannot make this showing, the
court will strike the claim.” (Bonni v. St. Joseph Health System
(2021) 11 Cal.5th 995, 1009 (Bonni).)
“At the first step, the moving defendant bears the burden of
identifying all allegations of protected activity, and the claims for
relief supported by them. When relief is sought based on
allegations of both protected and unprotected activity, the
unprotected activity is disregarded at this stage. If the court
determines that relief is sought based on allegations arising from
activity protected by the statute, the second step is reached.
There, the burden shifts to the plaintiff to demonstrate that each
challenged claim based on protected activity is legally sufficient
and factually substantiated. The court, without resolving
evidentiary conflicts, must determine whether the plaintiff’s
showing, if accepted by the trier of fact, would be sufficient to
sustain a favorable judgment. If not, the claim is stricken.
Allegations of protected activity supporting the stricken claim are
eliminated from the complaint, unless they also support a distinct
claim on which the plaintiff has shown a probability of
prevailing.” (Baral v. Schnitt (2016) 1 Cal.5th 376, 396 (Baral).)
We review an order granting or denying an anti-SLAPP motion

11
de novo. (Park v. Board of Trustees of California State University
(2017) 2 Cal.5th 1057, 1067 (Park).)

B. First-Prong

Fraley contends that defendants failed to satisfy their first-
prong burden to “specifically identify ‘all allegations of protected
activity, and the claims for relief supported by those allegations.’”
(Quoting Baral, supra, 1 Cal.5th at p. 396.) Because defendants
instead focused on the “gravamen or principal thrust of the
[c]omplaint”—without assessing each allegation of actionable
conduct in the context of the cause of action it supported—Fraley
maintains they failed to demonstrate that each of his causes of
action was predicated entirely on protected activity.
“A claim arises from protected activity when that activity
underlies or forms the basis for the claim. [Citations.] Critically,
‘the defendant’s act underlying the plaintiff’s cause of action must
itself have been an act in furtherance of the right of petition or
free speech.’ [Citations.] ‘[T]he mere fact that an action was filed
after protected activity took place does not mean the action arose
from that activity for the purposes of the anti-SLAPP statute.’
[Citations.] Instead, the focus is on determining what ‘the
defendant’s activity [is] that gives rise to his or her asserted
liability—and whether that activity constitutes protected speech
or petitioning.’ [Citation.] ‘The only means specified in section
425.16 by which a moving defendant can satisfy the [“arising
from”] requirement is to demonstrate that the defendant’s
conduct by which plaintiff claims to have been injured falls within
one of the four categories described in subdivision (e) . . . .’
[Citation.]” (Park, supra, 2 Cal.5th at pp. 1062–1063.)

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“Assertions that are ‘merely incidental’ or ‘collateral’ are not
subject to section 425.16. [Citations.] Allegations of protected
activity that merely provide context, without supporting a claim
for recovery, cannot be stricken under the anti-SLAPP statute.”
(Baral, supra, 1 Cal.5th at p. 394.)
Fraley’s complaint presented causes of action based on five
separate alleged wrongful acts and, as such, was subject to the
first-prong procedures outlined in Baral, supra, 1 Cal.5th 376.
To the extent Fraley contends that the order striking his
complaint should be reversed because defendants failed at the
outset to identify adequately the specific protected activity they
sought to strike, we disagree. Contrary to Fraley’s assertion,
defendants’ motion identified the five separate acts alleged by
Fraley in support of each of his causes of action. Defendants also
asserted that all of those actions—albeit only when viewed as
part of one, unified transaction—were wrongful and constituted
protected activity.
We therefore consider whether defendants met their first
prong burden to demonstrate that each claim they sought to
strike arose from one or more of the following five acts in
furtherance of protected activity: (1) enabling Kessler
(presumably through negotiation and drafting) to settle the
coverage action without regard to the lien; (2) taking possession
of the settlement proceeds without paying off the lien;
(3) disbursing the settlement proceeds (to themselves and
Kessler) without paying off the lien; (4) failing to withhold
sufficient funds from the Kessler disbursement to discharge the
lien; and (5) obtaining for Kessler more favorable terms from
Travelers, including Travelers’ agreement to circumvent the lien

13
in exchange for her agreement to a reduction in the settlement
amount.
We conclude that alleged acts one and five, enabling
Kessler to consummate the settlement and assisting her in
obtaining favorable terms, were in furtherance of protected
activity. Each is based on defendants’ conduct in either advising
Kessler on the settlement or in negotiating, drafting, and
executing the agreement. Such conduct is protected under
section 425.16. (Navellier v. Sletten (2002) 29 Cal.4th 82, 90
[“negotiation and execution of [a release], . . . involved
‘statement[s] or writing[s] made in connection with an issue
under consideration or review by a . . . judicial body’ (§ 425.16,
subd. (e)(2))”]; GeneThera, Inc. v. Troy & Gould Professional
Corp. (2009) 171 Cal.App.4th 901, 908 [cause of action based on
law firm’s communication of settlement offer “a matter connected
with issues under consideration or review by a judicial body”].)
As to alleged act two, taking possession of the settlement
funds, we note that the very nature of this act necessarily
followed the negotiation and execution of the coverage action
settlement agreement, which agreement described how Travelers
would disburse the funds. Moreover, the complaint’s description
of how defendants came to possess such funds provided context
for how defendants later chose to handle them. As such, alleged
act two is the type of activity that is collateral and provides
context to the allegations in the complaint and therefore does not
support a claim that can be stricken under the anti-SLAPP
statute. (Baral, supra, 1 Cal.5th at p. 396.)
Finally, as to alleged acts three and four—disbursing funds
without either paying off Fraley’s lien or withholding sufficient
funds to discharge it—we conclude they are not acts in

14
furtherance of protected activity. Defendants’ allegedly wrongful
disbursement was not required under the payment terms of the
settlement and, thus, was only tangentially related to a matter
under consideration by a judicial body. Moreover, the coverage
action litigation in which defendants represented Kessler was
dismissed prior to defendants making the challenged
disbursement to Kessler, thereby rendering the connection
between that act and defendants’ right of petition too attenuated
to warrant protection under section 425.16. (See Trilogy
Plumbing, Inc. v. Navigators Specialty Ins. Co. (2020) 50
Cal.App.5th 920, 925 [the fact that “conduct underlying [the
plaintiff’s] claims is related to pending litigation is insufficient to
confer protected activity status under section 425.16, subdivision
(e)(2);” conduct “must arise from the litigation to be protected”].)
In reaching our conclusion that the alleged acts of
disbursement fall outside the protection of the anti-SLAPP
statute, we acknowledge the arguably contrary holding in O&C
Creditors Group, LLC v. Stephens & Stephens XII, LLC (2019) 42
Cal.App.5th 546 (O&C Creditors) on which defendants primarily
rely. In that case, which was decided before the Supreme Court’s
recent decision in Bonni, supra, 11 Cal.5th at page 995, the court
reviewed the mixed causes of action before it, using a “gravamen”
or “principal thrust” approach. It concluded that because the
plaintiff’s claims were based on the negotiation and execution of a
settlement, the separate allegations concerning the wrongful
disbursement of settlement funds could not be “neatly cleaved”
from the protected alleged acts relating to the settlement
agreement. (O&C Creditors, supra, 42 Cal.App.5th at p. 580.)
Such a “gravamen” or “principal thrust” approach, however, has

15
since been disapproved by our Supreme Court in Bonni, supra, 11
Cal.5th at page 1010.
Further, even if the court in O&C Creditors had not applied
the “gravamen” or “principal thrust” approach, the facts of the
instant case are distinguishable from those at issue there. The
alleged acts of disbursement here were not required by the terms
of the settlement agreement. Instead, the agreement provided
that Travelers would pay the disputed funds to defendants, who
made no commitment under the agreement as to how they would
handle those funds once received (other than to assure Travelers
that Kessler would protect Fraley’s lien rights). Defendants
therefore had independent discretion concerning the timing and
amounts of any disbursements to Kessler. Indeed, under the
terms of the settlement, defendants were free to withhold all or
some portion of the funds in trust or to disburse them using a
check or wire transfer made jointly payable to Kessler and
Fraley. Their act of disbursing the funds to Kessler only, and
without withholding any amount, was sufficiently independent of
their conduct directly related to the coverage action to support a
conclusion that the disbursement was not in furtherance of the
right of petition.
Because defendants did not meet their burden of
demonstrating that the second, third, and fourth alleged acts
were in furtherance of protected activity, claims based upon those
acts could not be stricken from the complaint. The order striking
the entire complaint must therefore be reversed.

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C. Prong Two

In considering the second prong of the anti-SLAPP
analysis, we must determine whether claims based on the first
and fifth alleged acts, those acts which we have concluded were
undertaken in furtherance of protected activity, are nevertheless
barred by the litigation privilege.
The litigation privilege set forth at Civil Code section 47,
subdivision (b) “applies ‘to any communication (1) made in
judicial or quasi-judicial proceedings; (2) by litigants or other
participants authorized by law; (3) to achieve the objects of the
litigation; and (4) that have some connection or logical relation to
the action.’ [Citation.] The privilege is ‘absolute in nature,
applying “to all publications, irrespective of their maliciousness.”’
[Citation.] ‘“Any doubt about whether the privilege applies is
resolved in favor of applying it.”’” (Optional Capital, Inc. v. Akin
Gump Strauss, Hauer & Feld (2017) 18 Cal.App.5th 95, 116.)
Although Fraley argues that the litigation privilege does
not apply to the separate, noncommunicative conduct of
disbursing the settlement funds, he does not address whether the
privilege bars the conduct under review here—enabling Kessler,
through the drafting and negotiation of the settlement
agreement, to settle around Fraley’s lien and obtaining on her
behalf, more favorable terms, including Travelers’ agreement to
circumvent the lien. We conclude these alleged acts were
communicative in nature, undertaken to achieve the legitimate
objects of the coverage action, and sufficiently connected or
logically related to that action. They are therefore protected
under the litigation privilege and should be stricken from each of
the causes of action as an independent bases for liability.

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D. Attorney Fee and Cost Awards

The trial court’s awards of attorney fees and costs were
based on the order striking the entire complaint. Because we are
reversing that order and remanding the matter with directions,
we also must reverse the attorney fee and cost awards and
remand those matters to the court for further proceedings
consistent with this opinion. We express no opinion on whether
attorney fees should be awarded and, if so, in what amount.

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 V. DISPOSITION

The order striking the complaint is reversed and the matter
is remanded with directions to: (1) enter a new order on the anti-
SLAPP motion striking from the causes of action only the
allegations of protected activity identified above, in part IV. C.
concerning the litigation privilege; and (2) conduct further
proceedings on defendants’ requests for attorney fees and costs in
light of the new order on the special motion to strike. No costs
are awarded on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

KIM, J.

We concur:

RUBIN, P. J.

MOOR, J.

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