                                                                             FILED
                            NOT FOR PUBLICATION                              NOV 16 2015

                                                                          MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                         U.S. COURT OF APPEALS



                            FOR THE NINTH CIRCUIT


LAW OFFICES OF BRUCE                             No. 13-56316
ALTSCHULD; BRUCE EDWARD
ALTSCHULD, an individual,                        DC No. 2:12 cv-05457 JAK

              Plaintiffs - Appellants,
                                                 MEMORANDUM*
 v.

WILLIAM G. WILSON, individually;
REALWEALTH CORPORATION,

              Defendants - Appellees.


                    Appeal from the United States District Court
                       for the Central District of California
                    John A. Kronstadt, District Judge, Presiding

                     Argued and Submitted November 4, 2015
                              Pasadena, California

Before:       FARRIS, TASHIMA, and BYBEE, Circuit Judges.

      Plaintiffs Law Offices of Bruce Altschuld and Bruce Altschuld (together,

“Plaintiffs”) appeal the district court’s award of $4,888.10 in attorneys’ fees and

costs to Defendants Realwealth Corporation (“Realwealth”) and William Wilson


          *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
(together, “Defendants”). Plaintiffs brought a malicious prosecution claim against

Defendants in district court based on a prior state-court action in which Realwealth

obtained a $400,000 judgment against Plaintiffs on its cross-claim for legal

malpractice. Defendants moved to strike the malicious prosecution claim under

California’s anti-SLAPP (Strategic Lawsuits Against Public Participation) statute.

Cal. Civ. Proc. Code § 425.16. The district court took the motion under

submission, but before it rendered a decision, Plaintiffs voluntarily dismissed the

action without prejudice pursuant to Federal Rule of Civil Procedure

41(a)(1)(A)(i). Defendants subsequently filed a motion for attorneys’ fees and

costs pursuant to the anti-SLAPP statute. Notwithstanding Plaintiffs’ voluntary

dismissal, the district court, after concluding that it retained jurisdiction to consider

the motion and that Plaintiffs’ malicious prosecution claim was a SLAPP, awarded

Defendants their attorneys’ fees and costs.

      Plaintiffs timely appeal. We have jurisdiction pursuant to 28 U.S.C. § 1291,

and we affirm.

      California’s anti-SLAPP statute permits courts at an early stage to dismiss

meritless cases “aimed at chilling expression through costly, time-consuming

litigation.” Metabolife Int’l, Inc. v. Wornick, 264 F.3d 832, 839 (9th Cir. 2001);

see Cal. Civ. Proc. Code § 425.16(a)-(b). The statute also provides that a


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prevailing defendant shall recover attorneys’ fees and costs incurred in responding

to the SLAPP suit. Cal. Civ. Proc. Code § 425.16(c).

      1.     We have repeatedly held that the anti-SLAPP provisions governing

attorneys’ fees apply to state-law claims in federal court. Price v. Stossel, 620 F.3d

992, 999 (9th Cir. 2010); Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1109 (9th

Cir. 2003); United States ex rel. Newsham v. Lockheed Missiles & Space Co., 190

F.3d 963, 972-73 (9th Cir. 1999). It is also well established that a federal court

retains ancillary jurisdiction over attorneys’ fees disputes collateral to the

underlying litigation. Fed. Sav. & Loan Ins. Corp. v. Ferrante, 364 F.3d 1037,

1041 (9th Cir. 2004) (collecting cases). “[S]uch ancillary jurisdiction exists even

after the underlying litigation has concluded.” K.C. ex rel. Erica C. v. Torlakson,

762 F.3d 963, 968 (9th Cir. 2014) (citation omitted); see also Cooter & Gell v.

Hartmarx Corp., 496 U.S. 384, 395 (1990) (“[A] federal court may consider

collateral issues after an action is no longer pending [such as] . . . . award[ing]

costs after an action is dismissed for want of jurisdiction.”).

      Here, the motion for attorneys’ fees and costs is based on Defendants’ claim

that the complaint’s cause of action for malicious prosecution is a SLAPP; thus, the

issue of fees and costs is collateral to the action. See Ferrante, 364 F.3d at 1041

(explaining that where “the fee issue was so closely related to the underlying


                                            3
litigation[,]” the motion fell within the district court’s ancillary jurisdiction

(emphasis removed) (citations omitted)). Thus, despite Plaintiffs’ voluntary

dismissal of their action, the district court had ancillary jurisdiction to consider the

motion for anti-SLAPP fees and costs.

       2.     On the merits of the motion, the district court also properly concluded

that Defendants were entitled to anti-SLAPP fees and costs. Under the statute, “a

prevailing defendant on a special motion to strike” is entitled to recover attorneys’

fees and costs. Cal. Civ. Proc. Code § 425.16(c)(1). A defendant that brings an

anti-SLAPP motion to strike may “prevail,” even if the court did not actually grant

the motion. Where the plaintiff dismisses the alleged SLAPP before the court rules

on a pending motion to strike, the mooting of the merits of the motion does not bar

a defendant from recovering attorneys’ fees. Pfeiffer Venice Props. v. Bernard,

123 Cal. Rptr. 2d 647, 652-53 (Ct. App. 2002); Moore v. Liu, 81 Cal. Rptr. 2d 807,

809-10 (Ct. App. 1999).

       A court considering the award of fees on a pretermitted anti-SLAPP motion

to strike must engage in a two-part inquiry. Vess, 317 F.3d at 1110. First, the

defendant must make a prima facie showing that the plaintiff’s suit “arises from an

act in furtherance of the defendant’s rights of petition or free speech.” Mindys

Cosmetics, Inc. v. Dakar, 611 F.3d 590, 595 (9th Cir. 2010) (quoting Vess, 317


                                            4
F.3d at 1110). “Second, once the defendant has made a prima facie showing, the

burden shifts to the plaintiff to demonstrate a probability of prevailing on the

challenged claims.” Id.

      Plaintiffs do not contest that Defendants have met their burden under the

first step: that the malicious prosecution claim arises from Defendants’ free speech

in the prior state-court action. See Jarrow Formulas, Inc. v. LaMarche, 74 P.3d

737, 741 (Cal. 2003) (“[E]very Court of Appeal that has addressed the question has

concluded that malicious prosecution causes of action fall within the purview of

the anti-SLAPP statute.”).

      At the second step, the burden shifts to Plaintiffs to show a probability of

prevailing on their malicious prosecution claim. To establish a malicious

prosecution claim, Plaintiffs must plead and prove that the Defendants’ cross-

complaint in the prior state-court action was: (1) commenced by or at the direction

of the Defendants and pursued to a legal termination in Plaintiffs’ favor; (2)

brought without probable cause; and (3) initiated with malice. See Crowley v.

Katleman, 881 P.2d 1083, 1087 (Cal. 1994).

      The district court concluded that Plaintiffs failed to plead and prove the first

element of favorable termination. We agree. “To be considered ‘favorable’ . . . a

termination in the underlying action must reflect the merits of the action and the


                                           5
plaintiff’s innocence of the misconduct alleged in the lawsuit.” StaffPro, Inc. v.

Elite Show Servs., Inc., 39 Cal Rptr. 3d 682, 687-88 (Ct. App. 2006). In the prior

state-court action, Realwealth cross-claimed against Plaintiffs, alleging legal

malpractice. It is uncontested that Realwealth prevailed on this cross-claim and

obtained a $400,000 judgment against Plaintiffs. Such a judgment precludes a

finding that Plaintiffs were innocent of the alleged misconduct of legal malpractice

and that the state action was terminated in their favor. Nor can Plaintiffs, contrary

to their assertion, establish favorable termination based on their success on other,

discrete claims at-issue in the state-court action. The California Supreme Court

has squarely held that the favorable termination element requires “a favorable

termination of the entire action.” Crowley, 881 P.2d at 1093-94 (emphasis in

original). Contrary to Plaintiffs’ contention, Crowley’s holding, “which requires

judgment to have been reached in the plaintiff’s favor in the prior action as a

whole, cannot coexist with an exception for partial favorable termination.”

StaffPro, Inc., 39 Cal. Rptr. 3d at 692 (emphases in original) (internal citations

omitted). The cases cited by Plaintiffs concern the element of probable cause – a

separate and distinct element from favorable termination – and are therefore

inapposite.




                                           6
      Because Plaintiffs did not obtain a favorable termination in the prior state-

court action, they cannot meet their burden of showing a probability of prevailing

on the malicious prosecution claim under the second prong of the anti-SLAPP

inquiry.

                                     •    !    •

      The judgment of the district court is AFFIRMED.




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