Case Number: EC060584    Hearing Date: July 18, 2014    Dept: A

Li v Zhang

ATTACKS ON PLEADINGS (7)

Calendar: 3
Case No: EC060584
Date: 7/18/14

ALLEGATIONS IN THIRD AMENDED COMPLAINT:
The Plaintiff provided legal services to the Defendants. The Plaintiff was paid with promissory notes that were secured by deeds of trust. The Defendants attempted to thwart the Plaintiff’s ability to collect money by failing to service the mortgages on the properties.

CAUSES OF ACTION IN THIRD AMENDED COMPLAINT:
1) Declaratory Relief
2) 42 USC 1983 action for Violation of 5th Amendment Rights
3) 42 USC 1984(3) action for violation of Federal Rights
4) Conveyance with intent to defraud
5) Conveyance with intent to defraud
6) Conveyance with constructive intent to defraud
7) Conveyance with constructive intent to defraud
8) Conveyance with constructive intent to defraud
9) Breach of Fiduciary Duty
10) Negligence
11) Breach of Fiduciary Duty
12) Negligence
13) Conspiracy
14) Unjust Enrichment

RELIEF REQUESTED:
1. Matters of Defendants, Central Escrow, Inc. and Michelle Mai
a) Demurrer to entire Second Amended Complaint
b) Demurrer to entire Third Amended Complaint

2. Matters of Defendant, Ken Gross
a) Demurrer and Motion to Strike directed at Second Amended Complaint
b) Demurrer to entire Third Amended Complaint
c) Motion to strike Third Amended Complaint under anti-SLAPP statute

3. Matters of Defendants, DMDC Investments and Thanh Ly
a) Demurrer and Motion to Strike directed at Third Amended Complaint

DISCUSSION:
This hearing concerns the following seven matters:

1) the demurrer to the entire Second Amended Complaint of Defendants, Central Escrow, Inc. and Michelle Mai
2) the demurrer to the entire Third Amended Complaint of Defendants, Central Escrow, Inc. and Michelle Mai
3) the demurrer to the entire Second Amended Complaint of Defendant, Ken Gross;
4) the demurrer to the entire Third Amended Complaint of Defendant, Ken Gross;
5) the motion to strike the Third Amended Complaint under anti-SLAPP statute of Defendant, Ken Gross;
6) the demurrer to the Third Amended Complaint of Defendants, DMDC Investments and Thanh Ly; and
7) the motion to strike directed at the Third Amended Complaint of Defendants, DMDC Investments and Thanh Ly.

The attacks directed at the Second Amended Complaint are moot because the operative pleading is the Third Amended Complaint that was filed on May 21, 2014. The Court had granted the Plaintiff leave to file the Third Amended Complaint on April 25, 2014 when it sustained the demurrer to the Second Amended Complaint. Accordingly, the Court will take off calendar the demurrers to the Second Amended Complaint filed by the Defendants.

In addition, the demurrer and motion to strike of Defendants, DMDC Investments and Thanh Ly are moot because the Plaintiff filed a dismissal of his claims against these Defendants on July 9, 2014. Accordingly, the Court will take off calendar the demurrer and motion to strike of DMDC Investments and Thanh Ly.

Further, the Defendants have filed demurrers and motions to strike under CCP section 425.16. The Defendant, Ken Gross, set his motion to strike under CCP section 425.16 for this hearing. The Defendants, Central Escrow, Inc. and Michelle Mai, set their motion to strike under CCP section 425.16 for August 8, 2014.
An anti-SLAPP motion takes precedence over all other proceedings. Briggs v. Eden Council for Hope and Opportunity (1999) 19 Cal.4th 1106, 1109, 1115-1118. Accordingly, the Court will continue the demurrer of Defendants, Central Escrow, Inc. and Michelle Mai to be heard after their motion to strike on August 8, 2014.

The following inquiry begins with the analysis of Ken Gross’ motion to strike under the anti-SLAPP statute.

An initial issue is that the Plaintiff, James Li, filed an objection to the anti-SLAPP motion and the demurrer on the ground that the Defendant did not provide sufficient notice under CCP section 1005 when he served the papers by mail. Under CCP section 1005(b), a party must serve papers 16 court days prior to the hearing.
The proof of service indicates that the Defendant served the papers by personal service on James Li’s post office box on June 25, 2014. This was seventeen court days before the hearing.
James Li objects that service on his post office box was improper. However, CCP section 1011, an attorney may be personally served at the attorney’s office or at the attorney’s post office, if his residence is not known. James Li does not list an attorney’s office. Instead, a review of the webpage of the State Bar of California reveals that he provides the post office box as his address.
The Defendant states that he served the papers on the post office box because James Li does not have a law office and because James Li has not provided the address of his residence. Since James Li does not have a law office and since his residential address is unknown to the Defendant, CCP section 1011 authorized the Defendant to serve the papers by personal service on the post office identified by James Li as his address.
Accordingly, James Li’s objection to the manner of service of the Defendant’s motion to strike and demurrer is overruled.

1. Motion to Strike
Ken Gross was the opposing counsel who represented Cindy Tsui and Kwok Lo in the underlying case, GC038906, Tsui v. Chui. The underlying action was a partition action involving a dispute over the interests in real property. The Plaintiff, James Li, was representing Michael Chui, who is named as a Defendant in the pending case. The Plaintiff was paid with promissory notes secured by deeds of trust.
In the underlying action, the Court found in favor of Cindy Tsui and Kwok Lo and issued a partition order that required the sale of the property and then the distribution of the proceeds. The Court then reconveyed James Li’s deed of trust in the property to assist with the sale of the property and transformed James Li’s interest into a lien on the proceeds due to his client. The property was then sold to James Zhang.

Ken Gross argues that the claims against him in the Third Amended Complaint should be struck under CCP section 425.16 because they arise from a protected activity, i.e., the legal papers he filed in the judicial proceedings on behalf of his clients.

CCP section 425.16 permits the Court to strike causes of action arising from an act in furtherance of the defendant’s right of free speech or petition, unless the plaintiff establishes that there is a probability that the plaintiff will prevail on the claim.
The defendant bears the initial burden of showing that the claims fall within the class of suits subject to a motion to strike under CCP section 425.16, i.e., that plaintiff’s claim is based on an act of defendant in furtherance of his right to free speech. Fox Searchlight Pictures, Inc. v. Paladino (2001) 89 Cal. App. 4th 294, 304. Under CCP section 425.16(b)(2), the Court may consider the pleadings and supporting affidavits in making its determination. A defendant meets his initial burden by demonstrating that the act underlying the plaintiff’s case fits one of the categories identified in section 425.16(e). City of Cotati v. Cashman (2002) 29 Cal.4th 69, 78. Subdivision (e) defines the protected acts as the following:

1) any written or oral statement or writing made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law;
2) any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law;
3) any written or oral statement or writing made in a place open to the public or a public forum in connection with an issue of public interest; or
4) any other conduct in furtherance of the exercise of the constitutional right of petition or the constitutional right of free speech in connection with a public issue or an issue of public interest.

If the defendant meets this initial burden, the plaintiff then has the burden of demonstrating a probability of prevailing on the claim. Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal. 4th 728, 741. The plaintiff satisfies this burden by demonstrating that the complaint is both legally sufficient and supported by a sufficient prima facie showing of facts to sustain a favorable judgment if the evidence submitted by the plaintiff is credited. Id. Under CCP section 425.16(b)(2), a plaintiff may use affidavits to meet the plaintiff’s burden.

a. Defendant’s Burden
As noted above, the Defendant, Ken Gross, has the initial burden of demonstrating that the Defendant’s acts in the Third Amended Complaint fit into one the categories identified in section 425.16(e). The Defendant argues that the entire Third Amended Complaint is based on his advocacy as an attorney representing his clients in GC038906.
In order to determine whether a cause of action is subject to a SLAPP motion, the Court examines the principal thrust or gravamen of the plaintiff’s cause of action. Ramona Unified School Dist. v. Tsiknas (2005) 135 Cal. App. 4th 510, 519-520. The critical consideration for section 425.16 analysis is whether the cause of action is based on the defendant’s protected free speech or petitioning activity. Feldman v. 1100 Park Lane Associates (2008) 160 Cal. App. 4th 1467, 1478-1479. The anti-SLAPP statute’s definitional focus is not the form of the plaintiff’s cause of action but, rather, the defendant’s activity that gives rise to his or her asserted liability—and whether that activity constitutes protected speech or petitioning. Id.

A review of the Third Amended Complaint reveals that it alleges that it is arises from Ken Gross’ legal advocacy in the underlying case, GC038906. The Plaintiff alleges the following:

1) Ken Gross was a licensed attorney and the attorney of record for Tsui and Lui (paragraph 7); and
2) Ken Gross filed a motion to induce the Court in GC038906, to re-convey the Plaintiff’s deeds of trust (paragraphs 59 to 65).

The Plaintiff then seeks relief from the Court’s order that re-conveyed his interests in his causes of action. For example, in the second cause of action for violation of Fifth Amendment Rights, the Plaintiff alleges in paragraphs 92 to 94 that Ken Gross was acting to deprive the Plaintiff of the right to compensation under the United States Constitution when Ken Gross filed the motion to re-convey the deeds.
The acts of Ken Gross are written documents filed with the Court in the underlying proceedings regarding the issue of the Plaintiff’s deed of trust in the property. These acts fall under the conduct protected in CCP section 425.16(e)(1) because the motions, declarations, and argument are written and oral statements made before a judicial proceeding. Further, these acts fall under the conduct protected in CCP section 425.16(e)(2) because they are written or oral statements made in connection with an issue under consideration or review by a judicial body.
In addition, case law finds that under the plain language of CCP section 425.16, subdivision (e)(1) and (2), as well as the case law interpreting those provisions, all communicative acts performed by attorneys as part of their representation of a client in a judicial proceeding are per se protected as petitioning activity by the anti-SLAPP statute. Cabral v. Martins (2009) 177 Cal. App. 4th 471, 479-480. Since the Defendant’s acts in the Plaintiff’s Third Amended Complaint are communicative acts performed by him as part of his representation of his clients in GC038906, these acts are protected as petitioning activity under the anti-SLAPP statute.

Accordingly, the Defendant, Ken Gross, has met his burden because he has demonstrated that his acts in the Third Amended Complaint fit into the categories of protected conduct identified in section 425.16(e).

b. Plaintiff’s Burden
The Plaintiff has the burden of demonstrating a probability of prevailing on his claims. Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal. 4th 728, 741. The Plaintiff may satisfy this burden by demonstrating that each cause of action is both legally sufficient and supported by a sufficient prima facie showing of facts to sustain a favorable judgment if the evidence submitted by the Plaintiff is credited.
The Plaintiff did not meet his burden because he did not file any opposition papers.

Moreover , the Plaintiff cannot meet his burden because Ken Gross’ acts in the Third Amended Complaint are protected by the absolute litigation privilege. This privilege is enacted in Civil Code section 47(b) and provides that a publication made in any legislative or judicial proceeding is privileged. The litigation privilege is absolute and protects attorneys, judges, jurors, witnesses, and other court personnel from liability arising from communications made during a judicial proceeding. Budwin v American Psychological Assn. (1994) 24 Cal App 4th 875, 880. The privilege advances the policies of promoting complete and truthful testimony, encouraging zealous advocacy, giving finality to judgments, and avoiding unending litigation. Id. The principal purpose of this privilege is to afford litigants and witnesses the utmost freedom of access to the courts without fear of being harassed subsequently by derivative tort actions. Silberg v. Anderson (1990) 50 Cal.3d 205, 213-216.
The privilege is not limited to statements made in a courtroom. Hagberg v California Federal Bank (2004) 32 Cal 4th 350, 361. In addition to protecting testimony in court and statements made in pleadings, it includes statements made prior to the filing of a lawsuit, whether in preparation for anticipated litigation or to investigate the feasibility of filing a lawsuit. Id. Therefore, the privilege applies to any communication:

1) made in judicial proceedings;
2) by litigants or other participants authorized by law;
3) made to achieve the objects of the litigation; and
4) that has some connection or logical relation to the action.
Budwin v American Psychological Assn. (1994) 24 Cal App 4th 875, 880-881.

Doubts are to be resolved in favor of relevancy and pertinency; that is to say, the matter to which the privilege does not extend must be so palpably wanting in relation to the subject matter of the controversy that there can be no reasonable doubt of its impropriety. Friedman v. Knecht (1967) 248 Cal. App. 2d 455, 460. If the privilege is worth having, its purpose would be largely defeated if it were to vanish simply because one possible meaning of a statement made during judicial proceedings does not relate to them. Id.
The Plaintiff seeks relief based on allegations that Ken Gross violated his rights by filing a motion to reconvey his interest in the deed of trust. This involves communications made in a judicial proceeding, GC038906. The communications were made by an attorney, who is a participant authorized by law. The communications were made to achieve the object of the litigation, i.e., the partition of the property at issue. The communications had some logical relation to the action because they were related to the attempt to sell the property in order to distribute the proceeds to the parties. The litigation privilege applies to Ken Gross’ communications. Since the privilege is absolute, it is not possible for the Plaintiff to bring claims based on the allegations in the Third Amended Complaint.

Therefore, the Court will grant the Defendant’s anti-SLAPP motion and strike the claims in the Third Amended Complaint against him because the pleadings are based on the Defendant’s acts protected under CCP section 425.16.

c. Attorney’s Fees
The Defendant’s motion did not include a request for attorney’s fees. Instead, the Defendant states that he reserves the right to seek attorney’s fees under CCP section 425.16(c) in a separate motion.

2. Demurrer
The Defendant’s demurrer is moot in light of the ruling on the anti-SLAPP motion. Accordingly, the Court will take the demurrer off calendar.

RULING:
1. Defendants, Central Escrow, Inc. and Michelle Mai
a) TAKE OFF CALENDAR demurrer to entire Second Amended Complaint
b) CONTINUE hearing on demurrer to entire Third Amended Complaint to be heard after the anti-SLAPP motion set for August 8, 2014.

2. Defendant, Ken Gross
a) TAKE OFF CALENDAR demurrer and motion to strike directed at Second Amended Complaint
b) GRANT motion to strike Third Amended Complaint under anti-SLAPP statute
c) TAKE OFF CALENDAR demurrer to entire Third Amended Complaint

3. Defendants, DMDC Investments and Thanh Ly
a) TAKE OFF CALENDAR demurrer and motion to strike directed at Third Amended Complaint