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Oates must face lawsuit. Court allows a case alleging the developer filed a malicious suit against ex-partners.

March 31, 2005
Section: BUSINESS

By Ramon Coronado
Bee Staff Writer

A state appeals court has ruled that developer Marvin "Buzz" Oates can be sued for filing what the court called a meritless and malicious lawsuit against former partners who won a $7 million jury award against him.

Oates' suit was brought "without probable cause" and was "initiated with malice," according to Monday's 22-page ruling by the 3rd District Court of Appeal in Sacramento.

Oates filed suit in 2001 against Christo Bardis and Lloyd and Nancy Arnold weeks after the former partners filed suit against Oates, accusing the developer of defrauding them in a $71 million land deal in Southern California.

In October 2002, a Sacramento Superior Court jury found that Oates had cheated his former partners in a systematic pattern of kickbacks, markups and concealed commissions.

Shortly after the jury verdict, the former partners filed a malicious-prosecution suit against Oates, claiming that he knew his fraud suit was unsupported by facts.

"Oates manifested hostility toward Bardis, repeatedly referring to him using derogatory and profane language," according to the ruling by the appeals court.

Oates' lawyers argued before the appeals court that he filed suit against his former partners upon the advice of his longtime lawyer, who suspected the partners were defrauding Oates.

"From our perspective, allowing suits like this to proceed could either encourage individuals to shy away from following sound legal advice, or force them to pay for duplicative legal counseling," said Brendan J. Begley, an attorney for Oates.

"Mr. Oates is weighing his options as to how to proceed from this point," Begley said.

Oates' attorneys had asked Sacramento Superior Court Judge Loren E. McMaster to toss out the malicious-prosecution lawsuit, claiming the partners had failed to establish the likelihood they would prevail before a jury, but McMaster refused on Aug. 28, 2003, and Oates appealed the ruling.

Monday's appeals court ruling affirms McMaster's decision.

"The significance here is that two courts have said we will probably win against Oates," said Edward Freidberg, who represents Bardis and the Arnolds.

In June, the same appeals court slashed the $7 million jury verdict to $1.5 million, finding punitive damages were limited by a U.S. Supreme Court ruling.

The punitive damages were awarded after a trial in 2002 in which jurors found that Oates acted with fraud, malice and oppression toward Bardis and the Arnolds.

The jury slapped Oates, who has been listed by Forbes magazine as one of the 400 wealthiest Americans, with $165,527 in compensatory damages.

Freidberg challenged the appeals court reduction of damages to the California Supreme Court and the U.S. Supreme Court, but the two courts declined to get involved.

The latest appeals court ruling paves the way for another trial in Sacramento Superior Court in which Bardis and the Arnolds are seeking unspecified attorney fees and additional punitive damages, Freidberg said.

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The Bee's Ramon Coronado can be reached at (916) 321-1191 or rcoronado@sacbee.com.

  
  
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