Case Number: EC060584    Hearing Date: August 08, 2014    Dept: A

Li v Zhang

MOTION TO STRIKE (SLAPP)
(Also Calendared Demurrer)

Calendar: 21
Case No: EC060584
Date: 8/8/14

MP: Defendants, Central Escrow, Inc. and Michelle Mai
Joined by Defendants, DMDC Investments and Thanh Mihn Ly
RP: Plaintiff, James Li

RELIEF REQUESTED:
1. Demurrer to Third Amended Complaint.
2. Strike the Third Amended Complaint under CCP section 425.16

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

DISCUSSION:
This case arises from the Plaintiff’s claim that the Defendants attempted to thwart the Plaintiff’s ability to collect money owed to him for legal services. Plaintiff dismissed the entire action without prejudice on July 16, 2014.

This hearing concerns the demurrer and motion to strike the Complaint under section 425.16 that were filed by the Defendants, Central Escrow, Inc. and Michelle Mai. Defendants, DMDC Investments and Thanh Mihn Ly, filed a joinder to the anti-SLAPP motion. A defendant may join an anti-SLAPP motion as long as the joinder demonstrates that the conduct in the pleadings arises from protected First Amendment activity. Barak v. The Quisenberry Law Firm (2006) 135 Cal. App. 4th 654, 661. As the following analysis indicates, the joinder of Defendants, DMDC Investments and Thanh Mihn Ly, meets this burden.

The threshold issue is the effect of the Plaintiff’s dismissal. The dismissal makes the demurrer and motion to strike the Third Amended Complaint moot. Accordingly, the demurrer and motion to strike the pleadings will be taken off calendar.
However, a plaintiff’s voluntary dismissal of a suit, after a section 425.16 motion to strike has been filed, does not automatically preclude a Court from awarding attorney’s fees. Kyle v. Carmon (1999) 71 Cal. App. 4th 901, 918. Instead, the Court must adjudicate the merits of the special motion to strike. Id. An award of expenses under section CCP section 425.16 is only justified when a defendant demonstrates that plaintiff’s action falls within the provisions of subdivision (b) and the plaintiff is unable to establish a reasonable probability of success. Id.
Accordingly, the Court must evaluate the merits of the Defendants’ motion to strike and joinder and determine whether attorney’s fees should be awarded under CCP section 425.16. Section 425.16(c) provides that a prevailing defendant on a special motion to strike shall be entitled to recover his or her attorney’s fees and costs.

Defendants, Central Escrow, Inc. and Michelle Mai, were the escrow company and escrow officer who received the Court order that transformed James Li’s deed of trust into a lien on the proceeds. Defendants, DMDC Investments and Thanh Mihn Ly, were the real estate company and the real estate agent involved in the sale of the property. The acts at issue in the pending case concern a prior case, GC038906, Tsui v. Chui. The prior action was a partition action involving a dispute over interests in real property. The Plaintiff, James Li, was representing Michael Chui, who is named as a Defendant in the pending case. Plaintiff was paid with promissory notes secured by deeds of trust.
In the prior 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 transferred James Li’s interest into a lien on the proceeds due to his client. The property was then sold to James Zhang.

The Defendants argue that the claims against them in the Third Amended Complaint should be struck under CCP section 425.16 because they arise from a protected activity, i.e., communications made in connection with an issue under consideration by a judicial body.

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.

1. Defendants’ Burden
As noted above, the Defendants have the initial burden of demonstrating that the Defendants’ acts in the Third Amended Complaint fit into one the categories identified in section 425.16(e). The Defendants argues that the entire Third Amended Complaint is based on their 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 the Defendants worked with Ken Gross in the underlying case, GC038906. Ken Gross was the attorney who represented the plaintiffs in the prior case.

The Plaintiff alleges the following:

1) Ken Gross was a licensed attorney and the attorney of record for Tsui and Lui (paragraph 7);
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);
3) Thanh Mihn Ly, who is identified in paragraphs 9 and 10 as a real estate agent for DMDC Investments, submitted a declaration used by Ken Gross in which Thanh Mihn Ly claimed to have been appointed to represent the parties in the partition sale (paragraph 60;
4) Ken Gross recruited Michelle Mai, who is identified in paragraphs 8 and 11 as an escrow officer at Central Escrow, Inc., to further his objectives (paragraph 68);
5) Ken Gross and Michelle Mai colluded to cause the Court in GC038906 to re-convey the Plaintiff’s deeds of trust (paragraph 69); and
6) Michelle Mai used the Court order to remove the Plaintiff’s secured interests, i.e., the deeds of trust on the property (paragraph 76).

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 91 and 94 that Thanh Mihn Ly’s declaration accompanying Ken Gross’ motion in the prior case was an act to deprive the Plaintiff of the right to compensation under the United States Constitution. In paragraphs 93 and 94, the Plaintiff alleges that Michelle Mai’s actions under the Court order in the prior case were acts to deprive the Plaintiff of the right to compensation under the United States Constitution.
The acts of the Defendants were written and oral communications made in connection with the issue of the Plaintiff’s deeds of trust in the prior case, e.g., the act of submitting a declaration to the Court and communications made to the Court regarding the need to reconvey the Plaintiff’s deeds of trust to perform the partition sale. The issue of the Plaintiff’s deeds of trust was under consideration by the Court in the prior case. Since the Defendants’ acts were written and oral communications made in connection with an issue under consideration by a judicial body, these acts fall under the conduct protected in CCP section 425.16(e)(2).

Accordingly, the Defendants have met their burden because they have demonstrated that their acts in the Third Amended Complaint fit into the categories of protected conduct identified in section 425.16(e).

2. 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. This requires the Plaintiff to demonstrate 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. Id.
The Plaintiff does not meet this burden because he did not file any opposition papers.

Further, the Plaintiff cannot meet his burden because the Defendants’ 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 the Defendants violated his rights by making communications to the Court to support a motion to reconvey the Plaintiff’s interest in the deed of trust. This involves communications made in a judicial proceeding, GC038906. The communications were made by participants, who were authorized by law to provide evidence through declarations or to enforce the Court’s order. 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 the Defendants’ 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 find that the Defendants’ anti-SLAPP motion have merit. Section 425.16(c) provides that a prevailing defendant on a special motion to strike shall be entitled to recover his or her attorney’s fees and costs. The Defendants’ motions do not identify the amount of attorney’s fees that they are seeking.
Accordingly, the Defendants may seek attorney’s fees under CCP section 425.16(c) in a separate motion.

RULING:
1. Take off calendar demurrer and motion to strike.
2.Find that Defendants’ motions to strike the Complaint under the anti-SLAPP statute have merit and that the Defendants may seek attorney’s fees under CCP section 425.16(c).