Case Number: EC062388    Hearing Date: November 07, 2014    Dept: B

NOTICE: Department B will be dark on November 7, 2014. Please review the following tentative ruling. If you wish to have oral argument, please contact opposing counsel and agree upon one of the following dates for argument: November 21 or December 5. Then, please send an email to lmcfarlane@lacourt.org stating your case number, the agreed upon date for argument, and which party will give notice. The email must be received by 4:30 p.m. on November 7, 2014, or the Court’s tentative ruling will be the ruling and order of the Court. You may also send an email if you submit to the tentative ruling.

TENTATIVE RULING:

Motion to Vacate or Modify Order and/or New Trial

The Cross-Complainants, Pacific Crest, Dalia Grouji, Jacob Shahmoon, and Itai Alishav, filed a Cross-Complaint to seek relief from the judgment entered in EC055362. The judgment had been entered as a result of an order imposing terminating sanctions. The Cross-Complainants claimed that the judgment in EC055362 should be set aside because there was insufficient notice for the motion to impose terminating sanctions because the Cross-Defendants, Akzo Nobel, Kenneth Reynolds, and Michael Rock, engaged in extrinsic fraud by making false representations to the Court.

The Cross-Defendant, Kenneth Reynolds, was the attorney providing legal services to Cross-Defendant, Akzo Nobel Paints LLC, in the underlying case. The Cross-Defendant, Michael Rock is the director of credit and he provided declarations in support of the judgment and make false representations during the settlement negotiations.

The Cross-Defendants filed a motion to strike the Cross-Complaint under the anti-SLAPP statute because the Cross-Complaint was based on the Cross-Defendants’ protected petitioning activity. The hearing was set for September 12, 2014.

On September 5, 2014, the Cross-Complainants filed a notice of dismissal for the following:

1) Cross-Defendant, Kenneth Reynolds;
2) fourth cause of action for fraud; and
3) fifth cause of action for negligence.

The Court heard the Cross-Defendants’ motion to strike on September 12, 2014. After argument, the Court granted the motion and struck the Cross-Complaint under CCP section 425.16.

This hearing concerns the Cross-Complainants’ motion to “vacate or modify order/judgment” or a motion for new trial.

The procedure by which the Cross-Complainants are seeking relief is unclear because their memorandum does not cite to any legal authority in support of vacating or modifying the judgment and does not cite to the legal authority for granting a new trial. Since the Cross-Complainants did not identify the legal authority under which they are seeking relief, their memorandum is simply further arguments on the merits of the Cross-Defendants’ anti-SLAPP motion to strike.

The opposition papers raise this lack of proper notice by arguing that the memorandum is “one convoluted argument” that fails to address the specific statutory grounds for a new trial.

It appears that the Cross-Complainants’ motion is seeking the following relief:

1) a motion for a new trial under CCP section 657 because the memorandum includes argument that there was an error in law; and
2) a motion to vacate the judgment under CCP section 663 for an erroneous legal basis for decision.

1. Motion for New Trial

Under CCP section 657, the grounds for new trial are the following:

1) Irregularity in the proceedings of the Court, jury or adverse party, or any order of the court or abuse of discretion by which either party was prevented from having a fair trial.
2) Jury misconduct
3) Accident or surprise, which ordinary prudence could not have guarded against.
4) Newly discovered evidence, material for the party making the application, which he could not, with reasonable diligence, have discovered and produced at the trial.
5) Excessive or inadequate damages.
6) Insufficiency of the evidence to justify the verdict or other decision, or the verdict or other decision is against law.
7) Error in law, occurring at the trial and excepted to by the party making the application.

A motion for new trial is a creature of statute and the Court may grant a new trial only by conforming to the statutory procedures. Sanchez-Corea v. Bank of America (1985) 38 Cal.3d 892, 899-900.

A review of the memorandum reveals that the Cross-Complainants argue that there was a decision against the law or an error in law when the Court granted the anti-SLAPP motion. The Court cannot grant a new trial on an error in law unless the Court makes a determination that the error caused prejudice and that a new trial is warranted. People v. Ault (2004) 33 Cal. 4th 1250, 1271-1272 (holding that a trial court may order a new trial only if it makes a determination that there was prejudice).

The Court’s determination of the motion to strike under CCP section 425.16 was based on the following principles:

1) the Cross-Defendants had 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.
2) If the Cross-Defendants meet their burden, then the Cross-Complainants have the burden of demonstrating a probability of prevailing on their claims. Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal. 4th 728, 741. The Cross-Complainants 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 Cross-Complainants is credited.

A copy of the Court’s tentative ruling is attached as untabbed exhibit 1 to the request for judicial notice. The Court found that the Cross-Defendants had met their initial burden because the allegations in the Cross-Complaint indicated that the principal thrust or the gravamen of the Cross-Complainants’ claim is that the Cross-Defendants improperly filed written documents with the Court and that the Cross-Defendants made false representations in the written documents to obtain penalties and the judgment from the Court in the underlying case. The Cross-Complainants’ claims were based on the Cross-Defendants’ motion and declarations, which were written statements made in judicial proceeding and in connection with an issue under consideration by the judicial body. Since these claims fall within the categories identified in CCP section 425.16(e)(1) and (e)(2), the Cross-Defendants met their initial burden.

The Cross-Complainants argued that speech constituting extrinsic fraud does not fall within the protected categories identified in CCP section 425.16. The Cross-Complainants cite to Flatley v. Mauro (2006) 39 Cal.4th 299, 320, in which the Supreme Court found that, when the defendant concedes or it is uncontroverted that the defendant’s speech or petitioning activity is illegal, then the defendant is precluded from using the anti-SLAPP statute. The Supreme Court emphasized that the exception for illegal activity is very narrow and applies only in undisputed cases of illegality. Id. at 316 (“If … a factual dispute exists about the legitimacy of the defendant’s conduct, it cannot be resolved within the first step but must be raised by the plaintiff in connection with the plaintiff’s burden to show a probability of prevailing on the merits.”

Subsequent case law has found that this exception exists only in “rare cases in which there is uncontroverted and uncontested evidence that establishes the crime as a matter of law.” Cross v. Cooper (2011) 197 Cal.App.4th 357, 386. For example, the exception for illegal conduct has been applied in the following cases:

1) a case in which the plaintiff obtained a finding of factual innocence, which conclusively established that the defendant made a false police report, and the defendant did not contest that fact.
Lefebvre v. Lefebvre (2011) 199 Cal.App.4th 696, 703;
2) a case in which the defendant conceded that its acts of vandalism in support of animal rights issues were unlawful.
Novartis Vaccines & Diagnostics, Inc. v. Stop Huntingdon Animal Cruelty USA, Inc. (2006) 143 Cal.App.4th 1284, 1296.

In the pending case, the Cross-Defendants do not concede that they engaged in illegal conduct. Further, there is no uncontroverted evidence that the Cross-Defendants’ act of filing a motion and submitting declarations to the Court was illegal conduct. Accordingly, there are no grounds to find that it was an error in law to find that the Cross-Defendants had met their initial burden.

After the Court found that the Cross-Defendants had met their burden, the burden shifted to the Cross-Complainants to demonstrate a probability of prevailing on their claims. The Court found that the Cross-Complainants did not identify the allegations and evidence establishing each element of their claims. In addition, the Court found that the absolute litigation privilege under Civil Code section 47(b) barred the Cross-Complainants from meeting their burden because it applied to the written statements made in the judicial proceedings.

The Cross-Complainants argue that the litigation privilege does not apply because their third cause of action to set aside the judgment is based on extrinsic fraud and mistake. The Cross-Complainants cite to legal authority holding that the litigation privilege does not apply to an equitable action to set aside a settlement agreement for extrinsic fraud. Home Ins. Co. v. Zurich Ins. Co. (2002) 96 Cal. App. 4th 17, 26. The Cross-Complainants raised this argument at the hearing and the Court rejected it (see request for judicial notice, untabbed exhibit 2, page 7, line 5, to page 12).

In order to use this exception, the Cross-Complainants must provide evidence that establishes that the alleged fraudulent conduct was “extrinsic fraud”.

An otherwise valid and final judgment may only be set aside if it has been obtained through extrinsic fraud or mistake. In re Marriage of Stevenot (1984) 154 Cal. App. 3d 1051, 1068 to 1071. Fraud is extrinsic where the defrauded party was deprived of the opportunity to present his or her claim or defense to the court, that is, where he or she was kept in ignorance or in some other manner, other than from his or her own conduct, fraudulently prevented from fully participating in the proceeding. Id.

Any fraud is intrinsic if a party has been given notice of the action and has not been prevented from participating in the action. Id. When a claim of fraud goes to an issue involving the merits of the proceeding which the moving party should have guarded against at that time, or if the moving party was guilty of negligence in failing to prevent the fraud or mistake or in contributing thereto, or failed to take advantage of liberal discovery policies to fully investigate his or her claim, any fraud is intrinsic fraud. Id. Even though a party is mistaken as to the law and the facts, this is an insufficient basis to set aside a valid judgment, if the party reasonably could have discovered the mistakes. Id.

In the pending case, there is no evidence of extrinsic fraud. The Cross-Complainants had notice of the motion for terminating sanctions, had notice of the hearing, and were not prevented from fully participating in the proceeding. The Cross-Complaints claim that they did not appear at the hearing because of statements made by opposing counsel, Kenneth Reynolds. However, Mr. Reynolds, in the declaration he submitted in support of his motion to strike, stated in paragraph 10 that the Court’s tentative was to grant the motion for terminating sanctions. Mr. Reynolds states in paragraph 11 that at approximately 7:45 am, he received a telephone call from the Cross-Complainant, Alishav, inquiring about the March 8, 2013 hearing. Mr. Reynolds states that he indicated that he would be submitting on the tentative ruling to grant the motion.

These facts indicate that the Cross-Complainants, on the morning of the hearing, called opposing counsel about the motion. Further, these facts demonstrate that the opposing counsel advised them that the tentative ruling indicated that the Court would grant the motion. This is not extrinsic fraud because the Cross-Complainants knew about the hearing and could have appeared. Further, the Cross-Complainants were “guilty of negligence” because they failed to make their own effort to ascertain their rights to appear before they decided not to appear at the hearing. There is no extrinsic fraud because the Cross-Complainants were not prevented from appearing at the March 8, 2013 hearing to offer argument.

Accordingly, there is no evidence of extrinsic fraud that prevented the Cross-Complainants from appearing at the March 8, 2013 hearing. Since there is no evidence of extrinsic fraud, the litigation privilege bars their claim based on statements of counsel in the underlying case.

In addition, the Cross-Complainants argue that they can establish that the trial court did not have jurisdiction to grant the motion for terminating sanctions in their first cause of action to set aside the judgment on the lack of notice and in their second cause of action for lack of jurisdiction. The Court expressly considered and rejected this argument on pages 11 and 12 of the tentative ruling for September 12, 2014. The Cross-Complainants argue that the motion for terminating sanctions was filed on January 11, 2013, which was before jurisdiction was restored to the Court on January 14, 2013.

The Cross-Complainants’ argument is defective because the Court did not grant the motion for terminating sanctions until March 8, 2013. The Cross-Complainants admit on page 10, lines 2 to 3, of their motion that the Court had jurisdiction on March 8, 2013, when it granted the motion for terminating sanctions. Since the Cross-Complainants admit that the Court had jurisdiction when it granted the motion, the Cross-Complainants admit that they cannot establish this claim.

Therefore, the Court denies the request for a new trial.

2. Motion to Set Aside Judgment

The Cross-Complainants also request that the Court set aside the judgment under CCP section 663 on the argument that there was an incorrect or erroneous legal basis for the decision. CCP section 663 provides that a judgment or decree, when based upon a decision by the court, or the special verdict of a jury, may, upon motion of the party aggrieved, be set aside and vacated by the same court, and another and different judgment entered, for either of the following causes, materially affecting the substantial rights of the party and entitling the party to a different judgment:

1) Incorrect or erroneous legal basis for the decision, not consistent with or not supported by the facts; and in such case when the judgment is set aside, the statement of decision shall be amended and corrected.
2) A judgment or decree not consistent with or not supported by the special verdict.

The Cross-Complainants rely upon the same arguments discussed above, i.e., that the Court’s decision was an error in law. None of these arguments identify an error in law.

Therefore, the Court denies the request to vacate the judgment.