Mogan v. Sacks, Ricketts & Case LLP

Background

Michael Mogan, an attorney licensed in California, represented Veronica McCluskey in a San Francisco Superior Court case involving Airbnb and three Airbnb employees. The state court compelled arbitration and stayed the case. Mogan later sought to lift the stay, arguing that Airbnb had not timely paid an arbitration fee.

The state court rejected that argument, finding that Airbnb had paid on time and that the American Arbitration Association had made a clerical error. The state court later granted a sanctions motion in part, finding the motion to lift the stay factually and legally frivolous, and ordered Mogan—not McCluskey—to pay $22,159.50 in attorneys’ fees. The California Court of Appeal affirmed the sanctions order, and the California Supreme Court and the Supreme Court of the United States denied Mogan’s petitions for review.

Mogan then filed this federal action. He asserted abuse of process against all defendants and asserted intentional infliction of emotional distress, intentional interference with prospective economic relations, civil conspiracy, federal racketeering claims under the Racketeer Influenced and Corrupt Organizations Act, and unfair-business-practices claims against the Airbnb Defendants.

Requests for Judicial Notice

The court granted the parties’ requests for judicial notice of documents from the state-court and arbitration proceedings. It explained that those documents were public records and that many were also incorporated into Mogan’s complaint by reference.

Airbnb Defendants’ Motion to Dismiss

The Airbnb Defendants argued that Mogan’s claims were barred by California’s litigation privilege or, alternatively, by issue preclusion. The litigation privilege generally protects communications made in judicial or quasi-judicial proceedings by authorized participants when the communications are connected to the proceeding and further its objectives.

The court held that Mogan’s state-law claims against the Airbnb Defendants arose from communications with the American Arbitration Association and from sanctions-related activity in the state-court case. Those communications were made in connection with arbitration or anticipated arbitration, or as part of the state-court litigation. The court therefore held that the litigation privilege barred claims 1 through 4 and 7. It stated that the Airbnb Defendants had not shown that the California privilege applied to Mogan’s federal claims.

The court nevertheless dismissed all of Mogan’s claims against the Airbnb Defendants under issue preclusion, also called collateral estoppel. This doctrine prevents a party from relitigating an issue that was finally decided in an earlier proceeding. The court held that the state-court sanctions order, as affirmed on appeal, was a final judgment on the issues it addressed. Those issues included whether Airbnb paid its arbitration fee on time and whether Airbnb sought sanctions for a proper purpose.

The court found that the factual allegations underlying Mogan’s claims were identical to issues litigated and decided in the state proceedings. It also held that the issues were actually litigated and necessarily decided. Although the court did not decide whether Mogan personally was a party to the earlier litigation, it held that he was in privity with McCluskey because he represented her, was personally sanctioned, and should have expected to be bound by the state court’s findings. The court concluded that each of Mogan’s causes of action failed to state a claim because they relied on allegations contrary to the state-court findings.

SRC Defendants’ Anti-SLAPP Motion

Sacks, Ricketts & Case LLP and its attorneys Michele Floyd and Jacqueline Young moved to dismiss and strike Mogan’s abuse-of-process claim under California’s anti-SLAPP statute. Anti-SLAPP law provides an early procedure for challenging claims based on protected speech or petitioning activity, including statements and writings made in connection with judicial proceedings.

The court held that Mogan’s abuse-of-process claim arose entirely from litigation activity, including the sanctions letter, the sanctions motions, and related communications made by the SRC Defendants while representing Airbnb’s interests. The court rejected Mogan’s argument that the alleged conduct fell within the narrow exception for criminally illegal activity, explaining that allegations of illegality alone did not establish that exception.

At the second step of the anti-SLAPP analysis, the court applied the legal standard used for a motion to dismiss and held that California’s litigation privilege barred the claim. The court also rejected Mogan’s request for discovery because the discovery he sought concerned whether Airbnb’s arbitration payment was timely, not whether his abuse-of-process claim was legally viable. The court therefore granted the SRC Defendants’ special motion to strike the abuse-of-process claim.

Attorney’s Fees and Disposition

The SRC Defendants requested attorney’s fees for prevailing on the anti-SLAPP motion. The court denied that request without prejudice because the defendants had not requested fees in their motion and no separate noticed motion for fees appeared on the docket. The court stated that any fee motion should be filed by February 10, 2022.

The court granted the Airbnb Defendants’ and SRC Defendants’ motions to dismiss. It dismissed the claims with prejudice because leave to amend would be futile. Judge Thomas S. Hixson signed the order on January 10, 2022.