Squire Patton Boggs Slams GetFugu's Sham-Suit Claim
By Daniel Siegal
Law360, Los Angeles (February 05, 2015, 8:54 PM ET) -- Squire Patton Boggs LLP and Cummins & White LLP on Thursday urged a California appeals court to toss a malicious prosecution suit alleging the firms trumped up a securities fraud lawsuit on behalf of patent holders against mobile advertiser GetFugu Inc., arguing GetFugu brought the claim, and lost, in an earlier suit.
During oral arguments in Los Angeles, Kyle Kveton of Robie & Matthai APC, representing the two law firms, urged a three-judge panel to overturn Los Angeles Superior Court Judge Deirdre Hill’s order denying the firms’ motion to dismiss the case under California’s anti-SLAPP law, which bans suits used to curtail free speech. Kveton argued that although the earlier suit was pending appeal when Judge Hill refused to toss the new suit, that appeal has since been concluded, and thus GetFugu’s claim is barred by res judicata.
“If you follow respondents’ logic you turn the anti-SLAPP statute on its head,” he said. “Go ahead and file an action, lose it on anti-SLAPP on any ground, get fees awarded against you, but that’s OK, if you don’t appeal it, you can file it again.”
The complicated saga originates in January 2010, when attorneys from the law firms filed a $20 million suit alleging GetFugu engaged in racketeering and violated securities laws. GetFugu's purported racketeering lay in acquiring patents from Gizmondo Europe Ltd. that belonged to plaintiff Britons Simon Davies and David Warnock, amid publicity intended to drive up the stock price as part of a "pump-and-dump" operation meant to bilk GetFugu investors, according to court documents.
A federal district court tossed the RICO claims in August 2010 and rejected the firms’ bid to amend the complaint to include federal securities fraud claims, according to GetFugu.
GetFugu filed suit in California state court for malicious prosecution and defamation that same month, alleging the law firms and their clients knew the RICO allegations were without merit and merely used the lawsuit to publicize the racketeering claims and drive investors away from GetFugu. The law firms even released several malicious press releases broadcasting the bogus RICO claims, the company claimed.
Along with the law firms, the GetFugu suit named Richard J. Oparil of Patton Boggs (now Squire Patton Boggs) and Iman Reza of Cummins & White as defendants.
California-based GetFugu's main product was a mobile-phone app that allowed a user to snap a picture of a company logo, speak a company name into the phone or allow GPS to figure out their position, and get information without using a search engine, the company's complaint said. The app would have been available for 97 percent of the world's cellphones, the lawsuit said, “but for defendants' tortious and wrongful acts.”
The lawsuit and attendant publicity caused GetFugu’s stock value to plunge 99 percent, representing a loss in market capitalization of $500 million, and forced GetFugu to spend $700,000 on legal fees, the suit said.
In November 2010, the defendants filed a motion to dismiss the suit under the anti-SLAPP statute, arguing the alleged misconduct arose from protected legal activity and that GetFugu could not establish a probability of prevailing on either malicious prosecution or defamation claims. A trial court agreed and granted the motion.
GetFugu appealed the dismissal of the defamation cause of action, and in August 2013 the California Court of Appeals reversed the dismissal of the defamation cause as to Oparil and Reza only. That case is pending in state court.
While that appeal was pending, however, GetFugu in August 2011 filed another complaint for malicious prosecution against the firms in California state court.
In July 2012, Judge Hill denied the firms’ motion to dismiss that case under the anti-SLAPP statute as well, ruling that GetFugu had met its burden of showing a likelihood of prevailing via the allegations in its complaint. Judge Hill wrote that because the prior action was still pending on appeal, she would not rule that the complaint was legally insufficient.
The firms appealed, arguing that after the conclusion of the appeal in the first case — and the conclusion of a subsequent appeal regarding their request for attorneys’ fees in their case, in which the appeals court held the firms were entitled to fees for prevailing on the malicious prosecution claim — the second claim for malicious prosecution was barred by res judicata. The firms argue that GetFugu “made its bed” by failing to appeal the dismissal of the malicious prosecution claim in the first case and must now deal with the consequences.
On Thursday, Karin Vogel of Sheppard Mullin Richter & Hampton LLP, representing GetFugu, told the appeals panel that the company hadn’t appealed the dismissal of the malicious prosecution claim because it had not included that claim in its first amended complaint, which was the subject of the anti-SLAPP motion. Vogel argued that although the amended complaint mentioned the firms' maliciously prosecuting a suit against GetFugu, it only did so in reference to the defamation claim and can’t be used to say the claim was already asserted.
Presiding Justice Dennis M. Perluss, however, questioned whether that logic holds, especially in light of the appeals court’s ruling in the attorneys’ fees matter.
“I understand the logic of what you’re saying, but I’m not sure it’s correct as a matter of res judicata law,” he said.
Justices Dennis M. Perluss and Laurie D. Zelon and Los Angeles Superior Court Judge Luis Lavin sat on the panel that heard Thursday's arguments.
GetFugu is represented by Charles A. Danaher, Theona Zhordania and Karin Dougan Vogel of Sheppard Mullin Richter & Hampton LLP.
The law firms are represented by Kyle Kveton of Robie & Matthai APC.
The case is GetFugu Inc. v. Patton Boggs LLP et al., case number B243244 in the California Court of Appeals, Second Appellate District.
