Case Name: Barbara Holdings, Inc. v. 2006 Catalina Fund, LLC, et al.

Case No.: 18CV332880

Cross-Defendant Barbara Holdings, Inc.’s Special Motion to Strike First Amended Cross-Complaint as SLAPP Suit

Factual and Procedural Background

This a fraudulent conveyance action brought by plaintiff Barbara Holdings, Inc. (“BHI”) against defendants 2006 Catalina Fund, LLC, and 574 Mariscal Fund, LLC (collectively “Defendants”).

According to the allegations of the complaint, third parties 2006 Catalina LLC and 574 Mariscal LLC unlawfully obtained $150,000 that belonged to plaintiff BHI through fraud, conversion, and conspiracy.

The third parties then used the money to acquire real property in San Diego and in Palm Springs. The San Diego property was subsequently deeded to defendant 2006 Catalina Fund, LLC by the third party 2006 Catalina LLC for no consideration. The Palm Springs property was later deeded to defendant 574 Mariscal Fund, LLC by third party 574 Mariscal LLC for no consideration. Therefore, both the third parties did not receive the reasonable equivalent value of the real properties at issue.

These transfers were made with the actual intent to hinder, delay, or defraud plaintiff BHI in the collection of its claims. Plaintiff BHI has been harmed as a result.

On August 7, 2018, Plaintiff BHI filed a complaint against Defendants to set aside the fraudulent transfer of real property.

On January 15, 2019, Defendants filed a demurrer to the complaint. On February 7, 2019, the court overruled Defendants’ demurrer.

On February 22, 2019, Defendants filed their answer to the complaint and also filed a cross-complaint against BHI, Paul Kalra (“Kalra”), and Mark Hostetter (Plaintiff’s counsel; hereafter, “Hostetter”).

On March 25, 2019, Defendants filed the operative first amended cross-complaint (“FAXC”) against BHI, Kalra, and Hostetter (collectively, “Cross-Defendants”). The FAXC alleges Cross-Defendants wrongfully caused to be filed and recorded a Notice of Pendency of Action in Santa Clara County Superior Court, case number 17-CV-320282 (“Prior Action”). (FAXC, ¶10.) BHI, through its president, Kalra, and attorney, Hostetter, falsely represented that a claim pertaining to real estate was pending against properties located at 574 Mariscal Road in Palm Springs, CA (“Mariscal Property”) and 2006 Catalina Boulevard in San Diego, CA (“Catalina Property”), knowing the claims were not real estate claims pertaining to specific property as required by statute to lawfully file and record a Notice of Pendency of Action. (Id.) Cross-Defendants were also aware that Defendants bore no liability for the claims asserted against them in the Prior Action. (Id.) Defendants were dismissed by BHI from the Prior Action. (FAXC, ¶16.) Cross-Defendants thereafter filed and recorded new Notices of Pendency of Action against the Mariscal Property and the Catalina Property in the instant action, knowing they were false and did so intentionally and maliciously. (FAXC, ¶¶10 – 11.)

Based on these allegations, the FAXC asserts the following causes of action:

(1) Slander of Title
(2) Interference with Prospective Business Advantage
(3) Malicious Prosecution
(4) Abuse of Process

On April 23, 2019, BHI filed the motion now before the court, a special motion to strike Defendants’ FAXC.

I. Procedural violation.

As a preliminary matter, the court notes that Defendants’ opposition is untimely filed and served. Code of Civil Procedure section 1005, subdivision (b) states, “All papers opposing a motion … shall be filed with the court and a copy served on each party at least nine court days … before the hearing.” Based on a hearing date of August 1, 2019, Defendants’ opposition had to be filed and served no later than July 19, 2019. Defendants did not serve their opposition until July 22, 2019, one court day late, and did not file their opposition until July 23, 2019, two court days late.

In the opposition, Defendants’ counsel apologizes for the untimely filing by explaining that she was scheduled for a two to three week jury trial set to commence on July 22, 2019 and also became ill from Friday July 19, 2019 through Sunday July 21, 2019.

California Rules of Court, rule 3.1300, subdivision (d) states, “No paper may be rejected for filing on the ground that it was untimely submitted for filing. If the court, in its discretion, refuses to consider a late filed paper, the minutes or order must so indicate.” Since the court has discretion to consider a late filed paper, since cross-defendant BHI has not claimed any prejudice from the late filing, and to avoid the expenditure of any further judicial resources, the court will look past this procedural violation and consider the opposition on its merits. However, Defendants and Defendants’ counsel are hereby admonished for the procedural violation. Any future violation may result in the court’s refusal to consider the untimely filed papers.

II. Cross-defendant BHI’s special motion to strike Defendants’ FAXC is GRANTED.

A. The two-step procedure for anti-SLAPP motions.

Code of Civil Procedure section 425.16 requires a court to engage in a two-step process when determining whether a defendant’s anti-SLAPP motion should be granted. First, the court decides whether the defendant has made a threshold showing that the challenged cause of action is one “arising from” protected activity. The moving defendant’s burden is to demonstrate that the act or acts of which the plaintiff complains were taken in furtherance of the defendant’s right of petition or free speech under the United States or California Constitution in connection with a public issue. If the court finds such a showing has been made, it then must consider whether the plaintiff has demonstrated a probability of prevailing on the claim. In making these determinations, the trial court considers the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based. (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67.)

B. Step one – Threshold showing that the challenged cause(s) of action arise from protected activity.

“A defendant meets the burden of showing that a plaintiff’s action arises from a protected activity by showing that the acts underlying the plaintiff’s cause of action fall within one of the four categories of conduct described in section 425.16, subdivision (e). [Citation.] Those four categories are: ‘(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; (4) or 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.’” (Siam v. Kizilbash (2005) 130 Cal.App.4th 1563, 1569.)

Here, the FAXC against BHI is premised primarily upon the allegation that BHI and the other cross-defendants wrongfully filed and recorded a Notice of Pendency of Action against the Mariscal Property and the Catalina Property in the Prior Action and in the present action. (See FAXC, ¶¶10, 13, 16, 19.) “Recording of a notice of lis pendens (notice of pending lawsuit) is a ‘writing made in connection with an issue under consideration by a … judicial body’ (CCP §425.16(e)) and thus ‘squarely within’ the definition of the anti-SLAPP statute.” (Weil & Brown et al., CAL. PRAC. GUIDE: CIV. PRO. BEFORE TRIAL (The Rutter Group 2019) ¶7:604, p. 7(II)-15 citing Manhattan Loft, LLC v. Mercury Liquors, Inc. (2009) 173 Cal.App.4th 1040, 1050—claim for slander of title arises from protected activity.)

The FAXC also asserts a cause of action for malicious prosecution based upon BHI’s filing of the Prior Action against Defendants and subsequent dismissal of the Defendants from the Prior Action. (See FAXC, ¶¶10 and 16.) “An action for malicious prosecution based on a party’s or attorney’s statements or writings in an earlier judicial proceeding is subject to being stricken as a SLAPP suit: ‘By its terms, section 425.16 potentially may apply to every malicious prosecution action, because every such action arises from an underlying lawsuit, or petition to the judicial branch.’” (Id. at ¶7:570, p. 7(II)-8 citing Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 735 (Jarrow); Dickens v. Provident Life & Accident Ins. Co. (2004) 117 Cal.App.4th 705, 713; see also Zamos v. Stroud (2004) 32 Cal.4th 958, 964 – 965; see also Daniels v. Robbins (2010) 182 Cal. App. 4th 204, 215—“[t]he plain language of the anti-SLAPP statute dictates that every claim of malicious prosecution is a cause of action arising from protected activity because every such claim necessarily depends upon written and oral statements in a prior judicial proceeding.”)

The FAXC also asserts a claim for abuse of process based upon BHI’s filing of the Prior Action and recording Notices of Pendency of Action. (See FAXC, ¶19.) “Likewise, claims for abuse of process in an earlier lawsuit (e.g., a wrongful levy of execution on plaintiff’s property) are subject to an anti-SLAPP motion.” (Id. at ¶7:572, p. 7(II)-9 citing Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1063.)

In opposition, Defendants/ cross-complainants do not address whether the claims asserted in the FAXC arise from protected activity. Instead, Defendants/ cross-complainants argue the propriety of the recording of the Notices of Pendency of Action in the Prior Action and the propriety of BHI’s complaint in the instant action. For purposes of determining whether the FAXC arises from protected activity, Defendants/ cross-complainants’ arguments are entirely irrelevant. The court finds the claims asserted in the FAXC arise from protected activity.

C. Step two – Probability of prevailing.

“[I]f a court ruling on an anti-SLAPP motion concludes the challenged cause of action arises from protected petitioning, it then determines whether the plaintiff has demonstrated a probability of prevailing on the claim. To satisfy this prong, the plaintiff must state and substantiate a legally sufficient claim. Put another way, the plaintiff must demonstrate 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.” (Jarrow, supra, 31 Cal.4th at p. 741; internal citations and punctuation omitted.)

“The burden is on plaintiff to produce evidence that would be admissible at trial—i.e., to proffer a prima facie showing of facts supporting a judgment in plaintiff’s favor.” (Weil & Brown et al., CAL. PRAC. GUIDE: CIV. PRO. BEFORE TRIAL (The Rutter Group 2016) ¶7:1005, p. 7(II)-55 citing Chavez v. Mendoza (2001) 94 Cal.App.4th 1083, 1087; italics original.) “The ‘probability of prevailing’ is tested by the same standard governing a motion for summary judgment, i.e., in opposing a SLAPP motion, it is plaintiff’s burden to make a prima facie showing of facts that would support a judgment in plaintiff’s favor.” (Id. at ¶7:1008, p. 7(II)-56 citing Taus v. Loftus (2007) 40 Cal.4th 683, 714.) “The court does not weigh credibility or comparative strength of the evidence. The court considers defendant’s evidence only to determine if it defeats plaintiff’s showing as a matter of law.” (Id. citing Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 291.)

“Disparagement of title occurs when a person, without a privilege to do so, publishes a false statement that disparages title to property and causes pecuniary loss. The elements of the tort are (1) publication, (2) absence of justification, (3) falsity, and (4) direct pecuniary loss.” (Truck Insurance Exchange v. Bennett (1997) 53 Cal.App.4th 75, 84.) The esteemed commentators, Miller and Starr, state the cause of action a bit differently. “To recover damages for slander of title to real property, the plaintiff must prove six requisite elements: [1] There must have been a direct or indirect disparagement of the owner’s title. [2] The disparaging statement must have been published. [3] The matter published must be untrue. [4] When the statement was published it must not have been privileged and without justification. [5] The statement must have been made with malice. [6] Such published matter must be the proximate cause of pecuniary loss or damage to the owner of the interest.” (5 Miller & Starr, California Real Estate (3rd ed. 2000) Recording and Priorities, §11:40, p. 111.)

The elements for the tort of intentional interference with prospective economic advantage “are usually stated as follows: (1) an economic relationship between the plaintiff and some third party, with the probability of future economic benefit to the plaintiff; (2) the defendant’s knowledge of the relationship; (3) intentional acts on the part of the defendant designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the acts of the defendant.” (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1153.)

“In order to state a cause of action for malicious prosecution the plaintiff must allege that the prior action (1) was commenced by or at the direction of the defendant and pursued to a legal termination in plaintiff’s favor; (2) was brought without probable cause; and (3) was initiated with malice.” (Sagonowsky v. More (1998) 64 Cal.App.4th 122, 128 (Sagonowsky); see also CACI, No. 1501.) “The remedy of a malicious prosecution action lies to recompense the defendant who has suffered out of pocket loss in the form of attorney fees and costs, as well as emotional distress and injury to reputation because of groundless allegations made in pleadings which are public records.” (Sagonowsky, supra, 64 Cal.App.4th at p. 132.)

“The common law tort of abuse of process arises when one uses the court’s process for a purpose other than that for which the process was designed. [Citations.] It has been ‘interpreted broadly to encompass the entire range of “procedures” incident to litigation.’ [Citation.] [¶] ‘[T]he essence of the tort [is] … misuse of the power of the court; it is an act done in the name of the court and under its authority for the purpose of perpetrating an injustice.’ [Citation.] To succeed in an action for abuse of process, a litigant must establish that the defendant (1) contemplated an ulterior motive in using the process, and (2) committed a willful act in the use of the process not proper in the regular conduct of the proceedings.” (Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1056, 39 Cal.Rptr.3d 516, 128 P.3d 713 (Rusheen).)

(S.A. v. Maiden (2014) 229 Cal.App.4th 27, 41.)

One of the elements for a claim of abuse of process is harm to the plaintiff. (CACI, No. 1520.)

In each of the causes of action asserted by the FAXC, one of the common elements (as highlighted above) is some injury or damage suffered by the plaintiff or, here, cross-complainants. In one of the headings in their points and authorities, Defendants/ cross-complainants assert they suffered “substantial monetary losses,” but this naked assertion is not supported by any admissible evidence. Consequently, Defendants/ cross-complainants have not met their burden of demonstrating a probability of prevailing on any of the cross-claims asserted in the FAXC.

Accordingly, cross-defendant BHI’s special motion to strike FAXC as SLAPP suit is GRANTED.