Case Name: VEROS CREDIT LLC v. SCOTT R. KAUFMAN, ET AL.

Case No.: 16CV304484

This is an action for malicious prosecution and abuse of process arising out of a prior limited civil case filed in Santa Clara County, case no. 2013-1-CV-247552, Lorena Mejia v. San Jose Outlet Plus Trucks, Inc., et al. Current Plaintiff Veros Credit LLC (“Veros”) was a defendant in that prior action. Current Defendant Scott Kaufman, sole owner of Kaufman Law Offices (hereinafter “Defendant”) represented plaintiff Lorena Mejia (“Mejia”) in the prior action. A defense motion for summary judgment (“MSJ”) by Veros was denied by the Court (Hon. Elfving) in the prior action, but Veros obtained a judgment in its favor after a bench trial (before Hon. Lucas). Judge Lucas subsequently granted Veros’ motion to recover its attorneys’ fees, finding that Mejia had maintained the action in subjective bad faith. Veros then filed this action against Mejia and Defendant, with Mejia having since been dismissed. Currently before the Court is the special motion to strike (“Anti-SLAPP”) brought by Defendant against Veros’ Complaint.

Request for Judicial Notice

A precondition to judicial notice in either its permissive or mandatory form is that the matter to be noticed be relevant to the material issue before the Court. (Silverado Modjeska Recreation and Park Dist. v. County of Orange (2011) 197 Cal.App.4th 282, 307, citing People v. Shamrock Foods Co. (2000) 24 Cal.4th 415, 422 fn. 2.)

With its opposition to the motion Veros has submitted a request for judicial notice of 13 documents from the prior action, submitted as exhibits 1, 6 and 16-26 in Veros’ “Compendium of Evidence” rather than attached to the request. Deposition transcripts, declarations and moving papers cannot be noticed as to the truth of their contents. (See Intengan v. BAC Home Loans Servicing LP (2013) 214 Cal.App.4th 1047, 1057 [court may take judicial notice of existence of declaration but not of facts asserted in it]; Bach v. McNelis (1989) 207 Cal.App.3d 852, 865 [court may not notice the truth of declarations or affidavits filed in court proceedings].) The request is GRANTED as to all 13 documents pursuant to Evidence Code § 452(d) (court records). Only the court orders, exhibit 1 (a copy of Judge Lucas’ July 14, 2016 “Decision after Bench Trial and Judgment”), exhibit 24 (a copy of Judge Elfving’s May 3, 2016 order denying Veros’ defense MSJ in the underlying action), and exhibit 26 (Judge Lucas’ October 11, 2016 post-trial ruling on the motion for attorneys’ fees in the underlying action) can be noticed as to their contents. The other documents are noticed only as to their existence and filing dates.

Defendant’s Anti-SLAPP motion

As an initial matter Veros’ “objection” to the entire motion on the purported basis that Defendant failed to comply with Code of Civil Procedure (“CCP”) § 425.16(j)(1) is overruled and its request that the motion be dismissed is denied. Veros has not bothered
to cite any authority that would support this request and the Court is aware of none. (See San Ramon Valley Fire Protection Dist. v. Contra Costa County Employees’ Retirement Ass’n (2004) 125 Cal.App.4th 343, 350 [“[T]he District does not point to anything in the record indicating that this issue was raised at the trial court. Nor does the District cite any authority, or even seriously argue, that this defect affects either the trial court’s jurisdiction, or ours, to consider the merits, or that the District was prejudiced in any way by the Board’s failure to comply. The District also points to no authority indicating that failure to serve a special motion to strike on the Judicial Council, standing alone, warrants the denial of the motion, much less the dismissal of an appeal after the motion is denied on the merits.”])
When a special motion to strike is filed, the initial burden rests with the moving party to demonstrate that the challenged pleading arises from protected activity. (CCP §425.16(e); Zamos v. Stroud (2004) 32 Cal.4th 958, 965.) “A defendant meets his or her burden on the first step of the anti-SLAPP analysis by demonstrating the acts underlying the plaintiff’s cause of action fall within one of the four categories spelled out in [CCP] section 425.16, subdivision (e).” (Collier v. Harris (2015) 240 Cal.App.4th 41, 50-51.) That section provides that an “‘act in furtherance of a person’s right of petition or free speech under the United States or California Constitution in connection with a public issue’ includes: (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 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.” (CCP §425.16(e).)

There is no dispute (and Veros concedes) that this first step has been met here as “[b]y definition, a malicious prosecution suit alleges that the defendant committed a tort by filing a lawsuit,” and such a cause of action necessarily falls within the scope of CCP §425.16. (Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 734-735 [“Jarrow”].)

Only once the first step has been satisfied does the burden shift to the plaintiff to establish the second step, a “probability” that he/she/it will prevail on whatever claims are asserted against the defendant. (See CCP §425.16(b).) The plaintiff’s burden in this step “is subject to a standard similar to that used in deciding a motion for nonsuit, directed verdict, or summary judgment.” (Siam v. Kizilbash (2005) 130 Cal.App.4th 1563, 1570.) It requires the plaintiff to show that the complaint is both legally sufficient and supported by sufficient prima facie evidence to sustain a favorable judgment. (Premier Med. Mgmt. Systems, Inc. v. Cal. Ins. Guar. Ass’n (2006) 136 Cal.App.4th 464, 476.) “The plaintiff need only establish that his or her claim has ‘minimal merit’ [citation] to avoid being stricken.” (Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 291 (“Soukup”).) “In making its determination, the court shall consider the
pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based.” (CCP §425.16(b)(2).) The evidence considered is that which would be admissible at trial. (Chavez v. Mendoza (2001) 94 Cal.App.4th 1083, 1087.) The court considers both parties’ pleadings and evidence without weighing “the credibility or comparative probative strength”; however, “it should grant the motion if, as a matter of law, the defendant’s evidence … defeats the plaintiff’s attempt to establish evidentiary support for the claim.” (Soukup, supra, at p. 291.)

Veros’ evidentiary objection to the entirety of Defendant Scott Kaufman’s declaration in support of the special motion to strike (objection no. 1) is overruled. Of the remaining objections to portions of the Kaufman declaration, objections 6, 7, 8, 10, 12, 17 and 20 are sustained and all others are overruled.

In order to show a probability of prevailing on its claims for malicious prosecution Veros must show: (1) a lawsuit was commenced by or at the direction of the defendant which was pursued to a legal termination in the plaintiff’s favor; (2) the prior lawsuit was brought without probable cause; and (3) the prior lawsuit was initiated with malice. (Zamos v. Stroud (2004) 32 Cal.4th 958, 965; Daniels v. Robbins (2010) 182 Cal.App.4th 204, 216.) There is no dispute that the bench trial in the prior action ended in Veros’ favor and this establishes the first element.

Lack of Probable Cause: “Probable cause is a low threshold designed to protect a litigant’s right to assert arguable legal claims even if the claims are extremely unlikely to succeed. The standard of probable cause to bring a civil suit is equivalent to that for determining the frivolousness of an appeal, i.e., probable cause exists if any reasonable attorney would have thought the claim tenable. This rather lenient standard for bringing a civil action reflects the important public policy of avoiding the chilling of novel or debatable legal claims. Attorneys and litigants have a right to present issues that are arguably correct, even if it is extremely unlikely that they will win. Only those actions that any reasonable attorney would agree are totally and completely without merit may form the basis for a malicious prosecution suit.” (Mendoza v. Wichmann (2011) 194 Cal.App.4th 1430, 1449 [internal citations and quotation marks omitted].) “In determining whether the prior action was legally tenable, i.e., whether the action was supported by probable cause, the court is to construe the allegations of the underlying complaint liberally, in a light most favorable to the malicious prosecution defendant.” (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 165.)

The fact that Veros’ defense MSJ in the prior action was denied is a factor in the probable cause analysis. “California courts have long embraced the so-called interim adverse judgment rule, under which ‘a trial court judgment or verdict in favor of the plaintiff or prosecutor in the underlying case, unless obtained by means of fraud or perjury, establishes probable cause to bring the underlying action, even though the judgment or verdict is overturned on appeal or by later ruling of the trial court.’ This rule reflects a recognition that ‘[c]laims that have succeeded at a hearing on the merits, even if that result is subsequently reversed by a trial or appellate court, are not so lacking in potential merit that a reasonable attorney or litigant would necessarily have recognized
their frivolousness.’ That is to say, if a claim succeeds at a hearing on the merits, then, unless that success has been procured by certain improper means, the claim cannot be “totally and completely without merit.’ Although the rule arose from cases that had been resolved after trial, the rule has also been applied to the ‘denial of defense summary judgment motions, directed verdict motions, and similar efforts at pretrial termination of the underlying case.’” (Parrish v. Latham & Watkins (2017) 3 Cal.5th 767, 776-77 [“Parrish”], emphasis added, internal citations omitted but citing Zamos, supra, and Wilson v. Parker, Covert & Chidester (2002) 28 Cal.4th 811.)
“The rule applies only to rulings regarding the merits of the claim, not those that rest ‘solely on technical or procedural grounds.’ And even where a ruling is based on the court’s evaluation of the merits of the claim, the ruling does not establish the existence of probable cause if the ruling is ‘shown to have been obtained by fraud or perjury.’ While plaintiffs and their attorneys have ‘the right to bring a claim they think unlikely to succeed, so long as it is arguably meritorious,’ they have no right to mislead a court about the merits of a claim in an attempt to procure a favorable ruling, and such a ruling can provide no reliable indication that the claim was objectively tenable.” (Id. at p. 778.)

The Parrish case resembles the present action in that the party alleging malicious prosecution in Parrish had (like Veros here) brought a defense MSJ in the underlying action which was denied, although the trial court found post-trial that the action (for violation of the Cal. UTSA) was brought in bad faith. Despite this finding of bad faith, the Supreme Court ruled that the denial of the defense MSJ still functioned as an interim adverse judgment and established that a lack of probable cause could not be shown. “Unlike a finding that the summary judgment ruling was obtained by fraud or perjury, the trial court’s posttrial finding that the suit was brought in ‘bad faith’ within the meaning of the [Cal. UTSA] does not vitiate the trial court’s earlier finding that the [defendants’] suit had some arguable merit. The trial court’s finding of ‘bad faith’ rested on two conclusions: that the suit had been brought in ‘subjective bad faith’—that is, for the subjective purposes of preventing [plaintiffs] from launching a competing enterprise—and in ‘objective bad faith,’ meaning that the suit was objectively ‘specious.’ Neither conclusion is inconsistent with the court’s earlier determination that the suit had sufficient arguable merit to survive summary judgment. . . . [T]he trial court’s finding of objective bad faith in the underlying action was not a finding that the action completely lacked merit. . . . By contrast, we have made clear that ‘[o]nly those actions that any reasonable attorney would agree are totally and completely without merit may form the basis for a malicious prosecution suit.’” (Parrish, supra, 3 Cal.5th at 778-779, internal citations omitted, brackets added.)

Defendant’s special motion to strike is GRANTED as follows. Again it is undisputed that the first prong of anti-SLAPP analysis is satisfied here as Veros’ claims arise from Defendant’s protected activity—the filing and maintaining of the underlying action. When the second prong is considered Veros has failed to rebut the presumption of probable cause created by the interim adverse judgment, the trial court’s denial of Veros’ defense MSJ in the underlying action, and so it cannot show a probability of prevailing on its malicious prosecution claim. The denial of Veros’ MSJ in the
underlying action was not “solely on technical or procedural grounds,” and Veros has not established that the fraud/perjury exception to the interim adverse judgment rule applies because the court (Hon. Elfving) denied the MSJ on three separate grounds. “First, Veros fails to establish that Plaintiff has obtained all of the damages to which she is entitled, i.e., fees and costs, and that such terms are part of the amount capped by the FTC Holder Rule. . . . Second, to the extent that Veros is attempting to obtain summary judgment by arguing that Plus Trucks’ settlement offer to Plaintiff was appropriate, or that Plaintiff’s apparent acceptance of the $5,000 check from the dealer in September 2014 operated as a final settlement of her claims, it fails to meet its initial burden. Veros does not address the specific amounts paid to Plaintiff or establish that the $5,000 was actually cashed, which is a necessary element of establishing an accord and satisfaction of a claim. . . . Finally, Plaintiff establishes the existence of a triable issue of material fact with regard to whether she was current on the amounts due under the RISC when the vehicle was repossessed and thus whether Veros had a lawful right to possess it.” (Veros’ Ex. 24 at 1:24-2:10.)

The argument that Veros makes in its opposition to this motion—that the declaration opposing the MSJ by Mejia (presumably prepared with the aid of Defendant) contradicted her deposition testimony—was previously made and considered by the court in the underlying action. Footnote 1 of the MSJ order states that “[e]ven if the Court was inclined to consider the deposition testimony submitted by Veros for the first time in support of its reply, it is not indisputably clear that Plaintiff ceased making payments because she did not have the money such that her contention that the large payment she made was intended to be advanced monthly payments is demonstrably false. The Court therefore denies Veros’ request for sanctions pursuant to [CCP] section 437c, subd. (j).” [Veros’ Ex. 24 at 2:27-28, brackets added.] Because the issue of whether Mejia essentially lied to defeat the motion was considered by the Court in ruling on the defense MSJ in the underlying action, Veros cannot reargue the point now in an effort to escape the interim adverse judgment rule. “[W]here claims of fraud or perjury are litigated and rejected by a fact finder in an underlying case, those same claims cannot be relied on to establish the absence of probable cause in a subsequent malicious prosecution suit. Stated differently, one cannot relitigate adversely decided factual matters for purposes of establishing the fraud exception to the interim adverse judgment rule.” (Plumley v. Mockett (2008) 164 Cal.App.4th 1031, 1056.) Accordingly the interim adverse judgment rule prevents Veros from showing a lack of probable cause and from being able to demonstrate a probability of prevailing on its malicious prosecution claim.

Having found that Veros cannot show a probability of prevailing because it cannot show a lack of probable cause it is not necessary for the Court to also address whether it could establish that the underlying action was brought with malice.

Veros also cannot show a probability of prevailing on its second cause of action for abuse of process because the claim is not legally sufficient as pled in the Complaint. The tort of abuse of process requires abuse of legal process, not just filing or maintaining a suit for an improper purpose. (Trear v. Sills (1999) 69 Cal.App.4th 1341, 1359.) “Abuse of process is not just another name for malicious prosecution. Simply filing or
maintaining a lawsuit for an improper purpose (such as might support a malicious prosecution cause of action) is not abuse of process. [Citation.] Malicious prosecution and abuse of process are distinct. The former concerns a meritless lawsuit (and all the damage it inflicted). The latter concerns the misuse of the tools the law affords litigants once they are in a lawsuit (regardless of whether there was probable cause to commence that lawsuit in the first place).” (S.A. v. Maiden (2014) 229 Cal.App.4th 27, 41-42, emphasis in original.) Veros is bound by its complaint and the second cause of action as pled in the operative complaint (at 34-38) is completely redundant of the malicious prosecution claim and fails to allege an abuse of legal process. The argument made by Veros in its opposition to this motion (but not pled in the complaint) that Defendant and Mejia “abused” the discovery process by withholding material facts also does not state a legally sufficient claim.

Having prevailed on the special motion to strike Defendant is entitled to recover his attorneys’ fees and costs. “[A]ny SLAPP defendant who brings a successful motion to strike is entitled to mandatory attorney fees.” (Ketchum v. Moses (2001) 24 Cal.4th 1122, 1131; see also Vargas v. City of Salinas (2011) 200 Cal.App.4th 1331, 1348). CCP § 425.16(c) is ambiguous as to what “fees and costs” are recoverable, but legislative history shows it was it was intended to allow only fees and costs incurred on the motion to strike itself and not the entire litigation. (Lafayette Morehouse, Inc. v. Chronicle Pub. Co. (1995) 39 Cal.App.4th 1379, 1383; see also Platypus Wear, Inc. v. Goldberg (2008) 166 Cal.App.4th 772 [A prevailing defendant on an anti-strategic lawsuit against public participation (SLAPP) motion may recover attorney fees and costs only on the anti-SLAPP motion, not the entire suit.]). This limitation is relevant here as Defendant, through the declaration of Defense Counsel Kevin Faulk, appears to be seeking costs and fees for the entire action.
Accordingly, the request for attorneys’ fees and costs is denied without prejudice pending the submission of a further declaration from Defense Counsel requesting only those fees and costs incurred in bringing the motion.