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Hyde could not represent Buyer and make allegations of fraud that-based on information already in Hyde’s possession-were unfounded. 93, holding that where specific to the facts of a current representation, factual knowledge in the possession of an attorney, even though obtained in unrelated representations or transactions, can be imputed to the clueless client. Reaching all the way back to 1894, the Court of Appeal relied on Wittenbrock v. If Buyer was constructively aware of the seismic report in attorney Hyde’s possession, then Buyer’s allegation of Seller’s failure to disclose was utterly without merit, and Buyer’s lawsuit was brought without probable cause, an showing essential to proving malice. Recall that Hyde had the seismic report, having obtained it during escrow while representing Buyer’s predecessor LLC in the sale that was never consummated. Second, and a more universal issue (even though in an unpublished opinion), was whether Buyer could be charged with constructive knowledge of what was known to its attorney Hyde, even though never conveyed to the client. Rather, the lawsuit was dismissed without prejudice to avoid certain discovery sanctions against Buyer.
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The appellate court said no because the modest reduction in attorney’s fees could not support a negotiated settlement, especially where the client did not sign a settlement agreement releasing any claims. First, whether Buyer’s dismissal of its fraud claims with prejudice to avoid discovery sanctions and with payment of seller’s attorney’s fees and costs, could negate Seller’s favorable termination of the prior litigation argument because it was a “negotiated” settlement. Two issues were raised in Buyer’s appeal. The anti-SLAPP motion was denied, which order Buyer appealed. Seller asserted that Buyer’s fraud claim was brought without probable cause because Buyer had actual or constructive knowledge of the seismic fault because, unbeknownst to Buyer, its lawyer Hyde, had the seismic report from the prior, failed transaction with Buyer’s predecessor.īuyer responded with an anti-SLAPP motion against the malicious prosecution action, claiming the voluntary dismissal of its earlier case meant there could be no support that the fraud claim lacked merit, an essential element to proving malice. Seller brought an action for malicious prosecution against Buyer and Hyde. After protracted discovery to obtain Buyer’s files and those of its attorney Hyde to prove prior knowledge of the seismic facts, resulting in multiple court orders to produce requested documents, Buyer dismissed its case without prejudice to avoid court ordered discovery sanctions and also agreed to pay Seller’s attorney’s fees and costs. Seller maintained the report had been delivered to the attorney for a predecessor entity of Buyer (these entities had common ownership and the same attorney, Hyde), in a previous attempt to buy the winery.Īfter discovering the seismic issues impacting Buyer’s construction plans, Buyer sued for breach of contract, fraud and negligence, alleging the non-disclosure of the seismic fault. The focus of the fraud and misrepresentation claims by the Buyer was Seller’s failure to disclose a seismic report that showed an active fault line under a building pad. The case arises out of sale of a winery in Sonoma County by Roche (“Seller”) to Ram’s Gate, LLC (“Buyer”).
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A150459, A1500462 (filed 6/30/20), though unpublished, presents a cautionary tale for lawyers and clients. The recent Court of Appeal decision in Roche v.