Flores v. Emerich & Fike
Joe Flores, Visalia, CA, pro se.
Connie Flores, Fresno, CA, pro se.
Marshall C. Whitney, Scott Monroe Harkless,McCormick, Barstow, Sheppard, Wayte & CarruthLLP, Russell Gene Vanrozeboom, Caswell Bell &Hillison LLP, Fresno, CA, Tracy Tosh Lane, WilsonSonsini Goodrich & Rosati P.C., Mark Elise Crone,Crone Law Group, LLP, San Francisco, CA, forDefendants.
ORDER GRANTING MOTION TO STRIKE (DOC.34) AND MOTION TO DISMISS (DOC. 33/35).
*1 This is the third case filed by Joe and Connie Flores(“Plaintiffs”) concerning a series of packing andmarketing agreements entered into between Plaintiffsand DDJ, Inc., DDJ LLC, and related entities andindividuals. DDJ, Inc., and DDJ LLC filed for Chapter7 Bankruptcy Protection on January 3, 2005. Shortlythereafter, on March 1, 2005, Plaintiffs filed the instantcomplaint (Flores III ), naming as defendants a numberof individuals involved with DDJ and affiliatedcorporate entities (the “DDJ Defendants”). The FloresIII complaint also names as defendants the law firm ofEmerich & Fike and several individual attorneys at thatfirm (collectively, the “Fike Defendants”) whorepresent many of the DDJ Defendants.
The Fike Defendants move to dismiss and/or strike allof the claims against them. Specifically, the FikeDefendants move to dismiss the eighth cause of action(civil RICO) and to strike the second (maliciousprosecution), third (abuse of process), fourth (violationof the uniform fraudulent transfer act), seventh(conversion), ninth (negligent interference withcontract), tenth (conspiracy), and eleventh (invasion ofprivacy/defamation) causes of action.
II. PROCEDURAL HISTORY
Plaintiffs’ filed their initial complaint against DDJ, Inc.,DDJ LLC, and others in 1999, asserting claims underthe Perishable Agricultural Commodities Act(“PACA”), along with state law contract and tortclaims. See Flores et al v. DDJ, Inc., et al.,1:99-cv-5878 AWI DLB (“Flores I” ). In 2003, a juryfound for the Flores’ on all claims against DDJ Inc. andDDJ LLC (“the Judgment Debtors”).
On October 15, 2004, the Flores’ filed a second lawsuit,alleging that individual officers of the JudgmentDebtors fraudulently transferred assets from theJudgment Debtors into their own names. See In Re JoeFlores, et a. v. Dennis Hagobian, et al., 1:04-cv-6405OWW DLB (“Flores II” ).
On January 3, 2005, DDJ, Inc. and DDJ, LLC filed forChapter 7 bankruptcy protection. Further proceedingsin Flores I were stayed pursuant to the automatic stayprovision of the Bankruptcy Code. Flores I, Doc. 408at 2. Similarly, Flores II has been stayed pending noticeof whether the bankruptcy trustees will authorize thecase to proceed and whether the stay should be liftedfor that case. (Flores II, Doc. 19 at 3.)
Shortly after the bankruptcy filing, the Flores’ filed the141-page complaint in this case (“Flores III” ). Thethird complaint alleges various forms of alter egoliability, fraudulent transfers, and the existence of aracketeering enterprise. (Doc. 1 (“Compl.”), filed Mar.1, 2005.) Flores III names as defendants many of theindividual and corporate defendants named in Flores Iand Flores II, although the Judgment Debtors (DDJ Inc.and DDJ LLC) are not named. The new complaintnames as defendants: Emerich & Fike, a law firm thatrepresented DDJ Inc. and DDJ LLC in Flores I, and anumber of individual lawyers who practice at Fike (the“Fike Defendants”). Plaintiffs request damages,injunctive relief, and attorney’s fees.
*2 On May 10, 2005, counsel for DDJ Inc. and DDJLLC filed a “notice of filing bankruptcy” in this case,asserting that these proceedings also are subject to theautomatic stay because the pending claims concernproperty belonging to the debtors’ estate. The districtcourt determined that the automatic stay applied tosome of the defendants, but requested further briefingon the applicability of the stay to the remainingdefendants. (Doc. 72.)
The Chapter 7 Bankruptcy Trustee then submitted areport indicating that the Trustee does not intend topursue any of the claims against the Fike Defendantsand consented to an order vacating the stay. The districtcourt vacated the stay and set the Fike Defendants’previously-filed motions to dismiss and to strike forhearing.
Oral argument on these motions was heard December12, 2005. On February 3, 2006, the related adversarybankruptcy proceeding in Enoch Packing Inc., JoeFlores and Connie Flores v. DDJ Inc, et al., JamesSalvan Trustee, Case No. 02-17736-A-7, was dismissedwithout leave to amend. (Docs 105 & 106.) The Flores’moved for reconsideration before the bankruptcy court.(Doc. 107, dated Feb. 9, 2006.)
III. FACTUAL BACKGROUND
Joe and Connie Flores are apple growers based inVisalia, California. In September 1995, the Flores’entered into a packing and marketing agreement withFruit Marketing, Inc. (FMI), now known as DDJ Inc.During this relationship, FMI advanced the Flores’money in exchange for a security interest in the Flores’apple crops. The terms of the loan are set forth in apromissory note signed by Joe Flores.
In or around early 1998, the Flores began to suspectthat FMI was using improper accounting practices tocalculate the amount due to the Flores’ under thepacking and marketing contract. In April 1998, theFlores demanded access to all of FMI’s documentsrelated to the handling and selling of the Flores’ 1997and 1998 apple crops. Throughout the remainder of1998, the parties disputed the extent to which theFlores’ were entitled to access these documents andwhether the Flores would need to pay $0.53 per pagefor copies of the documents.
At some point in mid-1998, the Flores entered into apacking and marketing agreement with a different fruitpacker, Hemphill & Wilson enterprises (“H & W”). OnOctober 16, 1998, the Fike Defendants, on behalf oftheir client FMI, sent a letter to H & W, informing H &W that FMI had a secured interest in the proceeds fromthe Flores’ 1998 apple crop. On October 26, arepresentative from H & W informed the Flores that H& W would not perform the contract under suchcircumstances. On October 27, the Fike Defendants senta letter to the Flores’ formally demanding payment ofthe amount due under the note. Throughout this entireperiod, the Flores’ were still engaged in a dispute withFMI, represented by the Fike Defendants, over howmuch the Flores would pay to obtain copies of FMI’sdocuments.
On April 27, 1999, an attorney filed a complaint onbehalf of the Flores, naming DDJ and related entitiesand individuals as defendants. Flores, et al., v. DDJInc., et al., 1:99-cv-5878. Disputes over access todocuments from FMI’s files continued throughout 1999and 2000. Eventually, the Flores’ received a largenumber of documents from FMI. However, the Flores’now assert that these documents had been “sanitized,”by one of the DDJ Defendants, Dennis Hagobian, whowas seen “shredding documents from sales jackets formany days.” (See J. Flores Decl. at ¶ 58.) The evidenceof document destruction was known to the Flores’during the Flores I trial.
*3 On July 31, 1999, DDJ sold most of its property toNorman Trainer and his partner Steven Taft (“Trainerand Taft”). Among the assets transferred to Trainer andTaft was the Flores’ promissory note. As part of thetransaction, DDJ and Trainer and Taft entered into anagreement whereby DDJ agreed to defend against theFlores’ lawsuit and pursue the counterclaim on behalf ofTrainer and Taft.
The Fike Defendants filed a cross-complaint against theFlores on behalf of DDJ, alleging breach of contractand seeking payment on the promissory note. TheFlores later challenged DDJ’s standing to bring thecounterclaim on behalf of Trainer and Taft. Judge Ishiiallowed the claim to go forward.
A jury trial commenced in July 2003. On July 25, a juryreturned a special verdict, finding for plaintiffs on allcauses of action alleged against DDJ and finding for theFlores’ on the counterclaims. The jury determined thatthe Flores’ were entitled to damages.
On October 15, 2004, the Flores’ filed a second lawsuit,alleging that individual officers of the JudgmentDebtors fraudulently transferred assets from theJudgment Debtors into their own names. See In Re JoeFlores, et al. v. Dennis Hagobian, et al., 1:04-cv-6405(“Flores II” ).
On January 3, 2005, DDJ, Inc. and DDJ, LLC filed forChapter 7 bankruptcy protection.
IV. ALLEGATIONS IN FLORES III
1. Alter ego liability. (Compl. at 26.)
2. Malicious prosecution. (Id. at 46.)
3. Malicious use of process, spoilation of evidence, andfraudulent concealment of evidence. (Id. at 51.)
4. Violation of the Uniform Fraudulent Transfer Act[Civil Code § 3439 et seq.]. (Id. at 60.)
5. Violation of 7 U.S.C. §§ 499(b)(1), (2) & (4); PACA§§ 2(2) & (5); 21 U.S.C. §§ 331(a), (b), (c) & (k). (Id.at 84.)
6. Fraud, Deceit, Intentional and Negligent Fraud, andConstructive Fraud and Breach of Fiduciary Duty. (Id.at 86.)
7. Conversion. ((Id. at 89.)
8. Civil Racketeering in violation of 18 U.S.C. § 1961.
9. Negligent interference with or procurement of abreach of contract. (Id. at 124.)
10. Conspiracy to defraud and commit various otheroffenses against Plaintiff’s business interests. (Id. at127.)
11. Invasion of privacy. (Id. at 132.)
FN1. Many of these causes of action are subdividedinto numerous separate “claims.”
Although the complaint in this case is detailed and verylengthy, only a few factual allegations are directed atthe Fike Defendants. Specifically, the Complaint allegesthat the Fike Defendants:(1) Prosecuted thecross-complaint in Flores I without probable cause asto both Joe Flores and Connie Flores.
(2) Attempted to charge Joe Flores $0.53 per page tocopy documents prior to the commencement oflitigation in Flores I.
(3) Sent correspondence to H & W, the Flores’ newmarketing agent, notifying H & W that FMI had asecured interest in the Flores’ 1998 apple crop based onan outstanding debt allegedly owed to FMI by theFlores’.
*4 (4) Failed to produce documents in discovery thatFike defendants later attempted to use at trial.
(5) Destroyed relevant documents (or at least conspiredto destroy them).
(5) Maintained the underlying action in a manner to buythe DDJ Defendants additional time to defraud theircreditors.
(6) The DDJ Defendants’ alleged fraudulent transferswere used to pay the Fike defendant’s legal fees.
V. STANDARD OF REVIEW
A. Motion to Strike.
The Fike Defendants move to strike the second(malicious prosecution), third (abuse of process), fourth(violation of the uniform fraudulent transfer act),seventh (conversion), ninth (negligent interference withcontract), tenth (conspiracy), and eleventh (invasion ofprivacy/defamation) causes of action under California’s“Anti-SLAPP” statute, California Code of CivilProcedure Section 425.16, which provides in relevantpart:
A cause of action against a person arising from any actof that person in furtherance of the person’s right ofpetition or free speech under the United States orCalifornia Constitution in connection with a publicissue shall be subject to a special motion to strike,unless the court determines that the plaintiff hasestablished that there is a probability that the plaintiffwill prevail on the claim.
As used in this section, “act in furtherance of a person’sright of petition or free speech under the United Statesor California Constitution in connection with a publicissue” includes:
(1) any written or oral statement or writing made beforea legislative, executive, or judicial proceeding, or anyother official proceeding authorized by law;
(2) any written or oral statement or writing made inconnection with an issue under consideration or reviewby a legislative, executive, or judicial body, or anyother official proceeding authorized by law;
(3) any written or oral statement or writing made in aplace open to the public or a public forum in connectionwith an issue of public interest;
(4) or any other conduct in furtherance of the exerciseof the constitutional right of petition or theconstitutional right of free speech in connection with apublic issue or an issue of public interest.
Cal.Code Civ. Pro. § 425.16(b)(1) & (e) (emphasisadded).
A court considering a motion to strike under theanti-SLAPP statute must engage in a two-part inquiry.First, a defendant must make an initial prima facieshowing that the plaintiff’s suit “aris[es] from” activityprotected by the Anti-SLAPP statute. Brill Media Co.v. TCW Group, Inc., 132 Cal.App.4th 324, 329, 33Cal.Rptr.3d 371 (2005); Cal.Code Civ. Pro. §425.16(b)(1). In performing this analysis, the CaliforniaSupreme Court has stressed, “the critical point iswhether the plaintiff’s cause of action itself was basedon an act in furtherance of the defendant’s right ofpetition or free speech.” City of Cotati v. Cashman, 29Cal.4th 69, 78, 124 Cal.Rptr.2d 519, 52 P.3d 695(2002) (emphasis in original).
*5 If the defendant is able to make this thresholdshowing, the burden shifts to the plaintiff todemonstrate a probability of prevailing on thechallenged claims. In practice, a plaintiff must showthat the claim is “both legally sufficient and supportedby a sufficient prima facie showing of facts to sustain afavorable judgment if the evidence submitted by theplaintiff is credited.” Jarrow Formulas, Inc. v.LaMarche, 31 Cal.4th 728, 744, 3 Cal.Rptr.3d 636, 74P.3d 737 (2003). Claims for which Plaintiff is able tosatisfy this burden are “not subject to being stricken asa SLAPP.” Id.
B. Motion to Dismiss.
The Fike Defendants move to dismiss the eighth causeof action (civil RICO). Federal Rule of Civil Procedure12(b)(6) provides that a motion to dismiss may be madeif the plaintiff fails “to state a claim upon which reliefcan be granted.” However, motions to dismiss underFed.R.Civ.P. 12(b)(6) are disfavored and granted onlywhere the claim is legally insufficient. The questionbefore the court is not whether the plaintiff willultimately prevail; rather, it is whether the plaintiffcould prove any set of facts in support of his claim thatwould entitle him to relief. See Hishon v. King &Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d59 (1984). “A complaint should not be dismissed unlessit appears beyond doubt that plaintiff can prove no setof facts in support of his claim which would entitle himto relief.” Van Buskirk v. CNN, Inc., 284 F.3d 977, 980(9th Cir.2002) (citations omitted).
In deciding whether to grant a motion to dismiss, thecourt “accept[s] all factual allegations of the complaintas true and draw[s] all reasonable inferences” in thelight most favorable to the nonmoving party. TwoRiversv. Lewis, 174 F.3d 987, 991 (9th Cir.1999); see alsoRodriguez v. Panayiotou, 314 F.3d 979, 983 (9thCir.2002). A court is not “required to accept as trueallegations that are merely conclusory, unwarranteddeductions of fact, or unreasonable inferences.”Sprewell v. Golden State Warriors, 266 F.3d 979, 988(9th Cir.2001).
A. Motion to Strike the Second, Third, Fourth,Seventh, Ninth, Tenth, and Eleventh Causes of Actionas to the Fike Defendants.
The Fike Defendants advance a number of generalarguments in support of their motion to strike theSecond, Third, Fourth, Seventh, Ninth, Tenth, andEleventh Causes of Action (all of Plaintiff’s state lawcauses of action against the Fike Defendants). First, theFike Defendants maintain that California’s Anti-SLAPPstatute applies to all of these claims. If the Anti-SLAPPstatute applies, Plaintiffs are required to establish aprobability of prevailing on the covered claims bysetting forth facts that support a prima facie case.
The Fike Defendants maintain that Plaintiffs cannotestablish a prima facie case for any of the claims subjectto the motion to strike. Along with claim-specificarguments, the Fike Defendants argue generally that (a)that California’s Litigation Privilege, Cal. Civ.Code §47(b), bars all of Plaintiffs’ state law claims because theclaims arise out of communications they made asattorneys in the context of litigation; and (b) any statelaw claims based upon a conspiracy theory are barredby California Civil Code § 1714.10(a), which requiresa plaintiff to obtain a court order prior to filing a claimagainst an attorney for civil conspiracy with his or herclient.
1. Legal Background.
a. California’s Anti-SLAPP Statute.
*6 As discussed, a court considering a motion to strikeunder the anti-SLAPP statute must engage in a two-partinquiry. First, a defendant must make an initial primafacie showing that the plaintiff’s suit “aris[es] from”activity protected by the Anti-SLAPP statute. BrillMedia, 132 Cal.App.4th at 329, 33 Cal.Rptr.3d 371;Cal.Code Civ. Proc. § 425.16(b)(1). A cause of actiondoes not “arise from” protected activity simply becauseit is filed after protected activity took place. Cashman,29 Cal.4th at 76-77, 124 Cal.Rptr.2d 519, 52 P.3d 695.Nor does the fact “[t]hat a cause of action arguably mayhave been triggered by protected activity” necessarilymean that it arises from such activity. Cashman, 29Cal.4th at 78, 124 Cal.Rptr.2d 519, 52 P.3d 695. Thetrial court must instead focus on the substance of theplaintiff’s lawsuit in analyzing the first prong of aspecial motion to strike. Scott v. Metabolife Intern.,Inc., 115 Cal.App.4th 404, 413-414, 9 Cal.Rptr.3d 242(2004); see also Cashman, 29 Cal.4th at 78, 124Cal.Rptr.2d 519, 52 P.3d 695. In performing thisanalysis, the California Supreme Court has stressed,“the critical point is whether the plaintiff’s cause ofaction itself was based on an act in furtherance of thedefendant’s right of petition or free speech.” Cashman,29 Cal.4th at 78, 124 Cal.Rptr.2d 519, 52 P.3d 695(emphasis in original). In other words, “the defendant’sact underlying the plaintiff’s cause of action must itselfhave been an act in furtherance of the right of petitionor free speech.” Id.
If the defendant is able to make this threshold showing,the burden shifts to the plaintiff to demonstrate aprobability of prevailing on the challenged claims. Inpractice, a plaintiff must show that the claim is “bothlegally sufficient and supported by a sufficient primafacie showing of facts to sustain a favorable judgmentif the evidence submitted by the plaintiff is credited.”Jarrow, 31 Cal.4th at 738, 3 Cal.Rptr.3d 636, 74 P.3d737. Claims for which Plaintiff is able to satisfy thisburden are “not subject to being stricken as a SLAPP.”
b. Plaintiffs’ General Objections to the Application ofthe Anti-SLAPP Statute.
The Flores rase two general arguments, based onstatutory exemptions to the Anti-SLAPP law, in anattempt to establish that the Anti-SLAPP provisions donot apply to any of their claims. Section 425.17exempts from Anti-SLAPP coverage certain publicinterest lawsuits:
Section 425.16 does not apply to any action broughtsolely in the public interest or on behalf of the generalpublic if all of the following conditions exist:
(1) The plaintiff does not seek any relief greater than ordifferent from the relief sought for the general public ora class of which the plaintiff is a member. A claim forattorney’s fees, costs, or penalties does not constitutegreater or different relief for purposes of thissubdivision.
(2) The action, if successful, would enforce animportant right affecting the public interest, and wouldconfer a significant benefit, whether pecuniary ornonpecuniary, on the general public or a large class ofpersons.
*7 (3) Private enforcement is necessary and places adisproportionate financial burden on the plaintiff inrelation to the plaintiff’s stake in the matter.
However, nowhere in the nine pages of Joe Flores’opposition brief or their 142 page complaint is thereany indication that this lawsuit satisfies the conditionsset forth in Section 425.17. In fact, the record suggestsit is strictly a private dispute. Plaintiffs here seekmonetary damages for themselves only. None ofPlaintiff’s claims purport to vindicate an important rightsolely in the public interest or on behalf of the generalpublic. Plaintiffs have large, and very personal, stakesin the outcome of this litigation. The section 425.17exemption does not apply.
Plaintiffs also argue that a second exemption, set forthin § 425.17(c) applies in this case. Section 425.17(c)provides:
Section 425.16 [the Anti-SLAPP provisions] do[ ] notapply to any cause of action brought against a personprimarily engaged in the business of selling or leasinggoods or services, including, but not limited to,insurance, securities, or financial instruments, arisingfrom any statement or conduct by that person if both ofthe following conditions exist:
(1) The statement or conduct consists of representationsof fact about that person’s or a business competitor’sbusiness operations, goods, or services, that is made forthe purpose of obtaining approval for, promoting, orsecuring sales or leases of, or commercial transactionsin, the person’s goods or services, or the statement orconduct was made in the course of delivering theperson’s goods or services.
(2) The intended audience is an actual or potentialbuyer or customer, or a person likely to repeat thestatement to, or otherwise influence, an actual orpotential buyer or customer, or the statement or conductarose out of or within the context of a regulatoryapproval process, proceeding, or investigation, exceptwhere the statement or conduct was made by atelephone corporation in the course of a proceedingbefore the California Public Utilities Commission andis the subject of a lawsuit brought by a competitor,notwithstanding that the conduct or statement concernsan important public issue.
(emphasis added). Essentially, this provision exemptsfrom the Anti-SLAPP statute any statements or conductmade by a seller or lessor of goods and services duringthe course of a commercial transaction either to apotential buyer or customer. However, the exemptiononly applies to causes of action brought against“person[s] primarily engaged in the business of sellingor leasing goods or services….” The Fike Defendants,who are attorneys, are not covered by the plainlanguage of this provision, even though, technically, asattorneys, they market legal services to the public. Theiralleged actions here do not pertain to efforts to markettheir services nor were representations made topotential consumers or to gain a competitive advantage.This exception is also inapplicable.
c. California’s Litigation Privilege.
*8 California Civil Code § 47(b) provides in pertinentpart.
A privileged publication or broadcast is one made:
(a) In the proper discharge of an official duty.
(b) In any (1) legislative proceeding, (2) judicialproceeding, (3) in any other official proceedingauthorized by law, or (4) in the initiation or course ofany other proceeding authorized by law and reviewablepursuant to Chapter 2 (commencing with Section 1084)of Title 1 of Part 3 of the Code of Civil Procedure,except as follows:
(1) An allegation or averment contained in any pleadingor affidavit filed in an action for marital dissolution orlegal separation made of or concerning a person by oragainst whom no affirmative relief is prayed in theaction shall not be a privileged publication or broadcastas to the person making the allegation or avermentwithin the meaning of this section unless the pleading isverified or affidavit sworn to, and is made withoutmalice, by one having reasonable and probable causefor believing the truth of the allegation or averment andunless the allegation or averment is material andrelevant to the issues in the action.
* * *
(c) In a communication, without malice, to a personinterested therein, (1) by one who is also interested, or(2) by one who stands in such a relation to the personinterested as to afford a reasonable ground forsupposing the motive for the communication to beinnocent, or (3) who is requested by the personinterested to give the information. This subdivisionapplies to and includes a communication concerning thejob performance or qualifications of an applicant foremployment, based upon credible evidence, madewithout malice, by a current or former employer of theapplicant to, and upon request of, one whom theemployer reasonably believes is a prospective employerof the applicant. This subdivision authorizes a currentor former employer, or the employer’s agent, to answerwhether or not the employer would rehire a current orformer employee. This subdivision shall not apply to acommunication concerning the speech or activities ofan applicant for employment if the speech or activitiesare constitutionally protected, or otherwise protected bySection 527.3 of the Code of Civil Procedure or anyother provision of law.
The most relevant portion of section 47 is subsection b,which provides absolute privilege for any “publicationor broadcast” made in any judicial proceeding.California courts have given this privilege an“expansive reach.” Rubin v. Green, 4 Cal.4th 1187,1193-94, 17 Cal.Rptr.2d 828, 847 P.2d 1044 (1993). Itextends to any communication that bears “some relationto any ongoing or anticipated lawsuit.” Id. at 1194, 17Cal.Rptr.2d 828, 847 P.2d 1044. The privilege alsoapplies to a wide range of causes of action. TheCalifornia Supreme Court noted “the only exception to[the application of [section 47(b) to tort suits has beenfor malicious prosecution.” Id. The California courtshave applied the privilege to claims of abuse of process,Pollock v. Univ. of So. Cal., 112 Cal.App.4th 1416, 6Cal.Rptr.3d 122 (2003), fraud, Carden v. Getzoff, 190Cal.App.3d 907, 235 Cal.Rptr. 698 (1987), invasion ofprivacy, Ribas v. Clark, 38 Cal.3d 355, 364, 212Cal.Rptr. 143, 696 P.2d 637 (1985), and interferencewith contract, Pacific Gas & Elec. Co. v. Bear Stearns& Co., 50 Cal.3d 1118, 270 Cal.Rptr. 1, 791 P.2d 587(1990).
*9 Critically, the privilege only applies tocommunicative acts, not noncommunicative conduct.Rubin v. Green, 4 Cal.4th 1187, 1195-96, 17Cal.Rptr.2d 828, 847 P.2d 1044 (1993). For example,an attorney's act of counseling his or her client iscovered, even if it is alleged that the attorney mademisrepresentations during the course of suchcommunications. Id. However, pure conduct, such aseavesdropping, is not covered. Id.
The Flores' raise one general objection to theapplication of the litigation privilege. The Flores pointto language in section 47 that appears to limit theapplicability of section 47 to certain types ofcommunications only if those communications are made“without malice,” impliedly arguing that the FikeDefendants' actions were made with malice andtherefore should not be covered by the privilege. (SeeJ. Flores' Opp'n at 30). But the “without malice”language, which is mentioned twice in section 47, isinapplicable here. The phrase first occurs in anexception to the litigation privilege for certaincommunications made during the course of “maritaldissolution or legal separation.” See Cal. Civ.Code §47(b)(1). It appears again in section 47(c), whichprovides:
A privileged publication or broadcast is one made:
(c) In a communication, without malice, to a personinterested therein, (1) by one who is also interested, or(2) by one who stands in such a relation to the personinterested as to afford a reasonable ground forsupposing the motive for the communication to beinnocent, or (3) who is requested by the personinterested to give the information.
(emphasis added). Subsection (c) operates to protectagainst liability for communications made outside thecontext of litigation (i.e., statements that would notqualify for protection under subsection (b)). The statutegives an example of such a communication:Thissubdivision applies to and includes a communicationconcerning the job performance or qualifications of anapplicant for employment, based upon credibleevidence, made without malice, by a current or formeremployer of the applicant to, and upon request of, onewhom the employer reasonably believes is aprospective employer of the applicant.
Cal. Civ.Code § 47(c). With respect to communicationsfalling under the scope of subsection (c), the privilegeonly applies in the absence of evidence of malice.However, Defendants do not invoke this form of theprivilege. Rather, they rely upon subsection (b), at alltimes asserting the “litigation” privilege only as itrelates to communications made in the context ofpending or active litigation. The “without malice”language is inapplicable here.
2. Second Cause of Action for Malicious Prosecution.
a. Applicability of Anti-SLAPP Statute.
Plaintiffs' second cause of action for maliciousprosecution alleges that the Fike Defendants prosecutedthe cross-complaint in Flores I without probable causeas to both Joe Flores and Connie Flores. There is onlyone act underlying this claim-the filing of across-complaint. The Anti-SLAPP statute explicitlycovers “any written or oral statement or writing madebefore a ... judicial proceeding.” Cal.Code Civ. Pro. §425.16(e)(1); FN2 Jarrow, 31 Cal.4th 728, 3Cal.Rptr.3d 636, 74 P.3d 737.
FN2. Access to the court is a constitutional rightfounded upon the First Amendment. Cal. MotorTransport Co. v. Trucking Unlimited, 404 U.S. 508,510-11, 92 S.Ct. 609, 30 L.Ed.2d 642 (1972).
*10 In addition to the general arguments discussedabove, Plaintiffs raise several additional argumentsagainst application of the Anti-SLAPP statute to thisclaim. None of these arguments have merit. First,Plaintiffs place great emphasis on the phrase “publicissue” contained in the introductory paragraph of theAnti-SLAPP statute:
A cause of action against a person arising from any actof that person in furtherance of the person's right ofpetition or free speech under the United States orCalifornia Constitution in connection with a publicissue shall be subject to a special motion to strike ...
Cal.Code Civ. Proc. § 425.16(b)(1). The Flores arguethat the Fike Defendants' acts in filing thecross-complaint were not undertaken in connection witha “public issue” and therefore are not covered by thestatute. Plaintiffs operate under a mistakenunderstanding of the statute. Section 425.16(e)explicitly defines the phrase “act in furtherance of aperson's right of petition or free speech under theUnited States or California Constitution in connectionwith a public issue” to include “any written or oralstatement or writing made before a legislative,executive, or judicial proceeding, or any other officialproceeding authorized by law.” (emphasis added).
Plaintiffs again raise the commercial speech exceptionto the Anti-SLAPP statute, Cal.Code Civ. Proc. §425.17(c). As discussed above, the plain language ofthis provision makes it inapplicable to the FikeDefendants who advanced claims for money allegedlydue their clients, not to market their services asattorneys. Moreover, Mr. Flores' general discussion ofconstitutional theory applicable to commercial speechis misplaced. Nowhere does Mr. Flores explain orsuggest why general first amendment protections forcategories of speech have a bearing on whether the §425.17(c) exception should be applied in this case tothese defendants.
Finally, Mr. Flores cites Bertero v. National GeneralCorporation, 13 Cal.3d 43, 118 Cal.Rptr. 184, 529P.2d 608 (1972), an appeal of a jury verdict in amalicious prosecution case. In Bertero, the courtacknowledged that a malicious prosecution case couldbe based upon the filing of a cross-complaint withoutprobable cause. However, as Bertero was a post trialproceeding and was decided before the passage of theAnti-Slapp law, it is not relevant to the current inquiry.
The Fike Defendants have satisfied the thresholdburden of establishing that the Anti-SLAPP statuteapplies to the malicious prosecution claim. Asattorneys, they asserted claims to recover allegedunpaid loans from Plaintiffs on behalf of a client. Toadvance such claims in court, a public forum, implicatesFMI's and the Fike defendants' right to assert claims ina public forum, in the form of written statements madein a judicial proceeding.
b. Applicability of the Litigation Privilege.
The litigation privilege does not apply to claims ofmalicious prosecution. Malicious prosecution actionsare permitted because “the policy of encouraging freeaccess to the courts is outweighed by the policy ofaffording redress for individual wrongs when therequirements of favorable termination, lack of probablecause, and malice are satisfied. Silberg, 50 Cal.3d at216, 266 Cal.Rptr. 638, 786 P.2d 365. This is perhapsthe only exception to the absolute nature of thelitigation privilege. Id.; see also Rubin, 4 Cal.4th1193-94.
c. Merits of the Malicious Prosecution Claim.
*11 Because Defendants have met their burden to provethe applicability of the Anti-SLAPP statute, Plaintiffmust then make a “sufficient prima facie showing offacts to sustain a favorable judgment if the evidencesubmitted by the plaintiff is credited.” The elements ofa prima facie case of malicious prosecution are (1) ajudicial proceeding favorably terminated; (2) lack ofprobable cause; and (3) malice. Villa v. Cole, 4Cal.App.4th 1327, 1335, 6 Cal.Rptr.2d 644 (1992).Malicious prosecution actions are disfavored underCalifornia law. Sheldon Appel. Co. v. Albert & Oliker,47 Cal.3d 863, 872, 254 Cal.Rptr. 336, 765 P.2d 498(1989) (tort of malicious prosecution “has historicallybeen carefully circumscribed so that litigants withpotentially valid claims will not be deterred frombringing their claims to court by the prospect of asubsequent malicious prosecution” action).
The first element is satisfied in this case because theFlores' obtained a favorable jury verdict in Flores I anddefeated the defendants' cross-complaints. The FikeDefendants maintain that Plaintiffs are unable toestablish either lack of probable cause or malice.
(1) Probable cause.
Here, Plaintiffs allege that the Fike Defendantsprosecuted the cross-complaint in Flores I withoutprobable cause as to both Joe and Connie Flores. TheFlores' make a number of general arguments in supportof this contention, but none of these arguments satisfyPlaintiffs' burden.
First, Joe Flores suggests that the absence of probablecause is established because the jury found that theFlores' were not liable under the cross-complainant. (J.Flores' Opp'n at 17.) This argument defies logic. Thefirst element of a prima facie case of maliciousprosecution is a “judicial proceeding favorablyterminated.” The jury's verdict satisfies the firstelement, but Joe Flores suggests that the verdict alsosatisfies the second element-absence of probable cause.If this were the case, the second element would beredundant and unnecessary. A greater showing isneeded to establish absence of probable cause.
Probable Cause exists to file a claim whenever “anyreasonable attorney would have thought the claimtenable.” Sheldon Appel., 47 Cal.3d at 885, 254Cal.Rptr. 336, 765 P.2d 498. Litigants have the right topresent claims that are arguably correct, “even if it isextremely unlikely that they will win.” Id. at 885, 254Cal.Rptr. 336, 765 P.2d 498. Plaintiff correctly pointsout that, even if a reasonable attorney might believe inthe merits of a claim, one cannot escape liability if theaction “was prosecuted with knowledge of the falsity ofthe claim.” Albertson v. Raboff, 46 Cal.2d 375, 382,295 P.2d 405; Bertero, 13 Cal.3d at 55, 118 Cal.Rptr.184, 529 P.2d 608.
Turning then to the factual allegations contained withinthe Complaint and the Flores' oppositions to this motionto strike, the Flores' have not alleged facts to showabsence of probable cause or knowledge of the falsityof the claim. First, the Flores' conclusorily allege thatthe Fike Defendants lacked probable cause to believethat any debt was owed by the Flores' at all under thepromissory note. They do not allege facts showing whyor how the Fike defendants could then know the claimswere meritless. But, the Fike Defendants represent thatthey reviewed the accounting records and concludedthat these records evidenced a $9,843.66 debt to FMI.Although the jury in Flores I ultimately found that theFlores did not owe DDJ, as assignee, any money on thecounterclaim, nothing in the record indicates that theFike Defendants knew at the time that the claim wasfiled that the allegations in the counterclaim were falseor that the monetary claim was spurious. Nor is thereany indication in the record that no reasonable attorneywould have believed the counter-claim debt owed wasunjustified. (Plaintiffs bear the burden of establishing asmuch in this case, and cannot rely upon the trial recordfrom Flores I unless there are undisputed judiciallynoticeable facts that exist.)
*12 Second, the Flores' emphasize that, although JoeFlores signed a promissory note to DDJ, DDJ later soldthe note to a third party, Taft & Trainer, Inc. The FikeDefendants acknowledge that this transfer occurred, butmaintain that DDJ Inc. had an agreement with Taft &Trainer that DDJ would defend the Flores I lawsuit andpursue any counterclaim for the Flores' outstanding debtunder the note. (Fike Decl. ¶ 16) The existence of suchan agreement was supported by written agreements. (Id.at Exhibit 2.) Although the jury in Flores I ultimatelyfound that the Flores' did not owe money to either DDJor Taft & Turner, there is absolutely no indication thatthe indemnity, assignment, and litigation enforcementagreement was invalid, and, even if invalid, that theFike Defendants knew of any invalidity or that noreasonable attorney would have believed the agreementto be valid.
Finally, Ms. Flores specifically alleges that the FikeDefendants lacked probable cause to claim that she wasa signatory to the promissory note. Accordingly, Ms.Flores alleges that there was no probable cause to nameher as a counter-defendant. Ms. Flores correctly pointsout that the promissory note itself repeatedly refers toMr. Flores and never to Ms. Flores (or Connie Flores).For example, it declares that “DDJ, Inc. holds a securedinterest in certain apples and proceeds belonging to Mr.Flores.” However, the Fike Defendants submit that bothJoe and Connie Flores were responsible for thepromissory note because both were signatories tovarious packaging and marketing agreements and thatthe promissory note was entered into as part of anoverall package of agreements. (Fike Decl. ¶ 15.)Moreover, the promissory note itself states that the note“is secured by the financing statement given to lenderfrom borrower pursuant to their Packing and MarketingAgreement dated February 18, 1997.” (See PromissoryNote.)
The only relevant inquiry is whether the attorney'sclient provides facts that establish the existence ofprobable cause for the lawsuit's claims. The opposingparty's competing evidence is irrelevant
Plaintiffs and their attorneys are not required, onpenalty of tort liability, to attempt to predict how a trierof fact will weigh competing evidence, or to abandontheir claim if they think it likely that evidence willultimately weigh against them. They have a right tobring a claim they think unlikely to succeed, so long asit is arguably meritorious.
Wilson v. Parker Covert & Chidester, 28 Cal.4th at822, 123 Cal.Rptr.2d 19, 50 P.3d 733. Plaintiffs offerno evidence suggesting that the Fike Defendants hadany reason to doubt the existence of probable cause tobelieve that Ms. Flores was a proper counter-defendant.
To prove malice, Plaintiffs must show that the FikeDefendants filed the underlying action with a wrongfulmotive. Centers v. Dollar Markets, 99 Cal.App.2d 534,541, 222 P.2d 136 (1950). Malice can be inferred fromwillful misconduct, see Drum v. Bleau, Fox & Assoc.,107 Cal.App. 4th 1009, 1020 (2003), but no willfulmisconduct, such as the intent to vex or annoy, on thepart of the Fike Defendants is alleged in the complaintor otherwise evident in the record. This omission is afatal defect in a malicious prosecution claim.
*13 The Anti-Slapp law applies to Plaintiffs' secondcause of action. However, Plaintiffs have failed toestablish that this claim is “both legally sufficient andsupported by a sufficient prima facie showing of factsto sustain a favorable judgment if the evidencesubmitted by the plaintiff is credited.” Jarrow, 31Cal.4th at 738, 3 Cal.Rptr.3d 636, 74 P.3d 737. TheFike Defendants' motion to strike the second cause ofaction for malicious prosecution is GRANTED, withleave to amend.
3. Third Cause of Action for Abuse of Process.
Plaintiff's third cause of action is entitled “malicious useof process,” but appears to be a claim for “abuse ofprocess.” The tort of abuse of process constitutes “theuse of a legal process against another to accomplish apurpose for which it is not designed.” Drum, 107Cal.App.4th at 1019, 132 Cal.Rptr.2d 602. Its elementsare: (1) “an ulterior motive;” and (2) “a willful act inthe use of process not proper in the regular conduct ofthe proceedings.” Id.
The essence of the tort ‘abuse of process' lies in themisuse of the power of the court; it is an act done in thename of the court and under its authority for thepurpose of perpetrating an injustice....
Here, Plaintiffs allege that the Fike Defendants abusedlegal process in several ways:
(1) By attempting to charge Joe Flores $0.53 per pagefor copying FMI's documents before the Flores filedsuit;
(2) By sending correspondence to another packingagent, H & W, with an attached UCC-1 FinancingStatement, notifying H & W that FMI had a securedinterest in the Flores' 1998 apple crop based on anoutstanding debt, thereby causing other packers to“blackball” the Flores';
(3) By failing to produce documents in discovery thatthe Fike Defendants later attempted to use at trial andby destroying (or somehow aiding or having knowledgeof the destruction of) relevant documents that shouldhave been preserved for discovery.
(Compl.¶¶ 180, 182, 184, 189-192, 196.)
a. Applicability of the Anti-SLAPP Statute.
The Anti-SLAPP statute has been applied to abuse ofprocess claims where the underlying act arises from theexercise of the right to petition the courts for redress.See Siam v. Kizilbash, 130 Cal.App.4th 1563, 1570, 31Cal.Rptr.3d 368 (2005) (reasoning that a cause ofaction for abuse of process is subject to theAnti-SLAPP statute because “it arises from the exerciseof the right of petition.”).
The important question is whether the underlying actconstitutes an exercise of the right of petition and/orinvokes the court process. It is not so clear whether theFike Defendants' initial demand that Plaintiffs pay$0.53 per page to copy DDJ documents was made inconnection with the underlying lawsuit. In other words,it is not clear that Plaintiff's conduct invoked any“process” of the court or implicated the FikeDefendants' right to petition the courts. The disputeover copy costs occurred before any lawsuit was filed.Nor is it clear whether a lawsuit was anticipated at thattime. The copy charge complaint, if not connected witha lawsuit, cannot constitute “abuse of process.” GivingPlaintiffs the benefit of the doubt on this point, even ifFike Defendants' attempt to collect $0.53 per page forcopying DDJ documents was made in anticipation oflitigation, the Anti-SLAPP statute would apply as theattempt to collect copying costs is an incident of thelitigation process by which the Fike Defendants soughtto defend DDJ before a court of law. Moreover, theFlores, as prevailing parties, could have sought torecover excessive copying costs through a cost bill orotherwise addressed during the underlying lawsuit.
*14 The Fike Defendants' mailing of the notice ofsecured interest to H & M is more closely connected tothe Fike Defendants' right of petition. Communicationsmade in anticipation of litigation may be protected byboth the Anti-SLAPP provision and the litigationprivilege. See Briggs v. Eden Council for Hope &Opportunity, 19 Cal.4th 1106, 1115, 81 Cal.Rptr.2d471, 969 P.2d 564 (1999) (“Just as communicationspreparatory to or in anticipation of the bringing of anaction or other official proceeding are within theprotection of the litigation privilege of Civil Codesection 47, subdivision (b) ....such statements areequally entitled to the benefits of section 425.16.”). Theletter to H & M is a communication made inanticipation of litigation. It specifically puts anothercrop-lender/creditor that FMI/DDJ expects H & W to“honor and recognize the prior secured interest held by[FMI/DDC] in apple crops and proceeds otherwisebelonging to Mr. Flores. In the event that [H & W]distributes proceeds without regard to the securityinterest of [FMI/DDJ] in those proceeds, [FMI/DDJ]will exercise all remedies available to it with respect tosuch conduct.” (See Ex. B to Emerich Decl. (emphasisadded)). The mailing of this letter is an act protected bythe Anti-SLAPP statute, as it is a conventional notice ofthe claim of a prior security interest in crops, whichendeavored to protect the priority of that securityinterest and put the new lender on notice.
The allegations of discovery misconduct and the relateddestruction of evidence are also acts that fall within thescope of the Anti-SLAPP statute.
Defendants have met their burden of establishing thatthe Anti-SLAPP statute should apply to this cause ofaction.
b. Applicability of the Litigation Privilege.
Defendants assert generally that all of the acts whichunderlie the abuse of process claim are subject to thelitigation privilege. As discussed above, the letter to H& M is a communication sent in anticipation oflitigation to protect a claimed security interest, whichnaturally falls within the coverage of the litigationprivilege. The applicability of the privilege to the otheralleged acts is not so clear-cut. On the one hand, theattempt to charge the Flores’ $0.53 per page for copiesis communicative, and arguably conduct: the act ofdemanding payment for copies. Similarly, the FikeDefendants alleged attempt to use documents at trialthat were not produced at discovery and the FikeDefendants alleged involvement in the destruction ofevidence is arguably conduct, not communication.However, such matters are inherently part of thediscovery process and were redressible under discoveryrules and should have been addressed during theunderlying litigation.
Arguendo, even if the litigation privilege does notabsolutely bar this claim, the conduct is not sufficientlydescribed and not for a purpose the law intends toconstitute abuse of process as opposed to allegeddiscovery abuse.
c. Merits of the Abuse of Process Claim.
*15 Even if the litigation privilege does not apply,because the Anti-SLAPP statute applies to all of thealleged acts underlying Plaintiff’s abuse of processclaim, Plaintiffs must establish a possibility ofprevailing on an abuse of process claim based uponthese facts. In other words, do these factual allegationsset forth a prima facie claim of abuse of process. Theelements of an abuse of process claim are: (1) “anulterior motive;” and (2) “a willful act in the use ofprocess not proper in the regular conduct of theproceedings.”
The ulterior motive element can be inferred from proofof a willful improper act, Drum, 107 Cal.App.4th, at1020, 132 Cal.Rptr.2d 602, so the critical question iswhether Plaintiffs have established a “willful act in theuse of process not proper in the regular conduct of theproceedings.”
Put another way, to abuse process, a defendant must usecourt process for a purpose not intended, such as toobtain a collateral advantage. Plaintiffs’ allegations areconfusing, but it can be inferred from Plaintiffs’submissions that in early 1998, the Flores began tosuspect that DDJ was using inappropriate accountingpractices to calculate the amount of moneys owed to theFlores’ for several years worth of apple crops. TheFlores began to demand access to DDJ’s accountingrecords but were never satisfied with the manner andscope of access granted to those documents. Thespecific allegation of the Complaint is that costs werewrongfully demanded for copying these documents.The Flores believed they were entitled to copies ofaccounting for their crops, without having to pay forthem. They allege that the Fike Defendants and DDJbelieved (at least at the time) that defendants wereentitled to be reimbursed for the costs of copying thedocuments. It also appears that the Flores’ and the FikeDefendants had numerous disagreements as to the time,manner, and method of access to the accountingdocuments.
Eventually, the Flores’ turned to the MarketingEnforcement Branch of the California Department ofFood & Agriculture (“MEB”) to assist in resolving thedisputes over access to the documents. Individuals atMEB appear to have corresponded with the FikeDefendants to direct the Fike Defendants’ attention toapplicable regulations. These regulations required DDJto afford the Flores’ access to documents concerning themarketing of their fruit. This and other correspondenceeventually resulted in an agreement that the FikeDefendants and DDJ would provide the Flores withcopies of certain files. Critically, however, nowhere inthe complaint is it alleged that it was improper for theFike Defendants to demand reimbursement for the costsof copying documents for the Flores. Nor could it be. (Itis also worth noting that the Fike Defendants ended upnot charging the Flores’ $0.53 per page.) Plaintiffs havemade no allegation that the demand for copy costreimbursement was “a willful act in the use of processnot proper in the regular conduct of the proceedings.”Moreover, the issue could and should have beenredressed at the underlying trial.
*16 Even if the notice of secured interest sent to H & Wwas not a communication protected by the litigationprivilege, the mailing of that notice which was a normalstep a secured party takes to protect priority of asecurity interest and was not an abuse of process.Nothing submitted demonstrates that the FikeDefendants lacked probable cause to believe that theFlores’ actually owed money to FMI/DDJ pursuant tothe promissory note and that a filed financing statementreflecting a security interest in the Flores’ crops hadbeen granted and perfected. Sending notice of thesecond promissory note debt for crop loans along witha warning that FMI/DDJ would take steps to protect itssecurity interest was a commercially reasonable andpermissible action, unless Plaintiffs can allege contraryfacts.
Although the Fike Defendants acknowledge that therewere numerous discovery disputes during the Flores Ilitigation, nothing in the record indicates that the FikeDefendants engaged in “a willful act in the use ofprocess not proper in the regular conduct of theproceedings.” In the hundreds of pages of submissionsfrom the Flores regarding the instant motions, thealleged discovery violations are mentioned only a fewtimes. Specifically, Joe Flores’ declaration, atparagraphs 60 and 61, states:
On January 14, 2003, after Fike, on numerousoccasions declaring that there were no more documentsin their care, custody or control, suddenly by CourtOrder, manages to find numerous documents previouslyrequested which he denied existed. [citations]
Accordingly, it is well documented and furtherevidenced that Defendants, David R. Emerich, Esq.,and David A. Fike, Esq., knew or should have knownthey were abusing the process since inception of thismatter, which commenced on April 29, 1999 [citation],and continued on through pre-trial discovery by thespoilation and concealment of evidence …
These conclusory allegations are insufficient toestablish that the Fike Defendants willfully used“process not proper in the regular conduct of theproceedings.” At most, they suggest a violation of civildiscovery rules. Such a violation, on its own, does notconstitute an abuse of process. Moreover, there wereadequate remedies to enforce the discovery rules in theprior case. It is impermissible to sue for prior violationsof discovery rules in a subsequent lawsuit. There areany number of legitimate (i.e., not improper) reasonswhy documents initially not disclosed might later beprovided in discovery. This is the nature of civillitigation.
The Fike Defendants’ motion to strike the third cause ofaction is GRANTED.
4. Fourth Cause of Action for Violation of theUniform Fraudulent Transfer Act (“UFTA”).
Plaintiff alleges that various defendants engaged inunlawful transfers in violation of the UniformFraudulent Transfers Act (UFTA). The complaint setsforth the dates, amounts, and parties involved in eachallegedly fraudulent transfer. Critically, however, theFike Defendants are not mentioned in any of thesespecific fraudulent transfer allegations. Rather, theUFTA allegation only relates to the Fike defendants intwo ways. First, Plaintiffs allege that the FikeDefendants’ activities bought time for the otherdefendants to plan and execute the fraudulent transfers:
*17 [T]he malicious prosecution as alleged in theSECOND CAUSE OF ACTION, the malicious abuseof process as alleged in the THIRD CAUSE OFACTION, [the statutory violations] as alleged in theEIGHTH CAUSE OF ACTION, and Conspiracy toDefraud, to Interfere with the Business Relationship, toUnlawfully Injure a Business, to Destroy a Business,and to Defraud a Creditor … as alleged in the TENTHCAUSE OF ACTION … played a major contributingfactor in allotting time for the planning of the actualfraudulent transfer of proceeds belonging to ALTEREGO DDJ, INC. and AlTER EGO DDJ, LLC by [theFike Defendants] with the actual intent to hinder, delayor defraud some or all of ALTER EGO DDJ, INC. andALTER EGO DDJ, LLC’s then and future creditorsincluding and principally Plaintiffs in connection withthe collection of their claims.
(Compl. at 71.) This passage arguably suggests that theFike Defendants contributed to “allotting time” for thefraudulent transfers by defending against the Flores Ilawsuit, filing the counter-claim, and taking variousother steps to protect its clients interests. Second,Plaintiffs suggest that the Fike Defendants are liable infraud for accepting payment from DDJ for servicesrendered.
a. Applicability of the Anti-SLAPP Statute.
The alleged acts are all related to the Fike Defendants’right to petition the courts to represent clients asattorneys and are therefore covered by the Anti-SLAPPstatute.
b. Applicability of the Litigation Privilege.
The Fike Defendants maintain that the acts alleged inthis cause of action are protected by the litigationprivilege as well. However, it is difficult to determinethe applicability of the privilege because neither thecomplaint or any subsequent filing explains the exactnature of the Fike Defendants’ conduct that allegedlycontributed to “allotting time” for the other defendantsto engage in fraudulent transfers. There is not evenconduct alleged that constitutes a fraudulentconveyance. The parties are not required to guess as tothe basis of the claims. As a general matter, each partyto litigation is entitled to have legal representation of itschoice.
c. Merits of the Uniform Fraudulent Transfer ActClaim.
Again, even if the litigation privilege is inapplicable,because the Anti-Slapp statute applies, the Flores mustestablish that this claim is “both legally sufficient andsupported by a sufficient prima facie showing of factsto sustain a favorable judgment if the evidencesubmitted by the plaintiff is credited.” Jarrow, 31Cal.4th at 738, 3 Cal.Rptr.3d 636, 74 P.3d 737.
A transfer of assets made by a debtor is fraudulent as toa creditor if the transfer was made with an actual intentto defraud any creditor, or was made without receivingreasonably equivalent value. Cal. Civil Code § 3439.04;Reddy v. Gonzales, 8 Cal.App. 4th 188, 122-23 (1992).
First, Plaintiffs assertion that the Fike Defendants’committed fraud by accepting payment for servicesrendered is not legally cognizable.
*18 An encumbrance by a debtor to an attorney, madefor value in the form of an antecedent obligation forlegal services, is not fraudulent as to another creditor,under applicable provisions of the Uniform FraudulentTransfer Act, and this is true even though the transferwas a preference that resulted in the debtor beingunable to satisfy debts of other creditors.
Wyzard v. Goller, 23 Cal.App.4th 1183, 1185, 28Cal.Rptr.2d 608 (1994).
Second, an allegation that the Fike Defendantsintentionally worked to “allot time” for the otherdefendants to engage in fraudulent transfers is legallyunintelligible. Plaintiffs have submitted correspondencefrom the Fike Defendants to Plaintiffs and others, whichis covered by the litigation privilege. No facts arealleged as to how the Fike Defendants engaged in anyconduct that helped allot time for the other defendantsto engage in fraud, or that the Fike Defendants engagedin any improper conduct or had any knowledge or intentto defraud. Conclusory allegations do not substitute fornecessary facts to maintain a claim, particularly in theface of an Anti-Slapp motion to strike.
The Fike Defendants’ motion to strike the fourth causeof action is GRANTED.
5. The Seventh Cause of Action for Conversion andConspiracy to Convert.
Plaintiffs allege that many of the individual andcorporate defendants committed a number of acts ofconversion. As with the UFTA claim above, Plaintiffsassert that the Fike Defendants aided the otherdefendants’ acts of conversion, by “conspiring,participating, and aiding and abetting by and throughtheir actions as attorney(s) of record for Defendants …[the] successful … unlawful practice of conversion bymeans of [ ] fraudulent transfers….” (Compl.¶ 342.)These conclusory allegations have no legal significance.It is not alleged that the Fike Defendants independentlyconverted the Flores’ property, only that they conspiredto do so. This is not a legally cognizable claim.
In California, Civil Code § 1714.10 requires a plaintiffto obtain a court order prior to filing any claimpremised upon an attorney’s conspiracy with a client:
No cause of action against an attorney for a civilconspiracy with his or her client arising from anyattempt to contest or compromise a claim or dispute,and which is based upon the attorney’s representation ofthe client, shall be included in a complaint or otherpleading unless the court enters an order allowing thepleading that includes the claim for civil conspiracy tobe filed after the court determines that the partyseeking to file the pleading has established that there isa reasonable probability that the party will prevail inthe action.
§ 1714.10(a) (emphasis added). Failure to seek such anorder is a complete defense to the filing of any actionfor civil conspiracy, and may form the basis of a motionto strike. § 1714.10(b).
The allegation in this cause of action falls squarelywithin the coverage of this provision and Plaintiffs didnot obtain a court order prior to filing this claim.
*19 The Flores’ rejoin by pointing to language in §1714.10(c) which carves out an exception for anattorney’s acts which “go beyond the performance of aprofessional duty to serve the client and involve aconspiracy to violate a legal duty in furtherance of theattorney’s financial gain.” (See J. Flores’ Opp’n at 22.)However, the complaint fails to allege the existence ofacts that go beyond the performance of a professionalduty and/or that violate a legal duty in furtherance ofthe Fike Defendants’ own financial interests.
The Fike Defendants’ motion to strike the seventh causeof action is GRANTED.
6. Ninth Cause of Action for Negligent InterferenceWith or Procurement of a Breach of Contract.
Plaintiffs’ negligent interference with contract claimalleges that the Fike Defendants negligently sent a copyof the Flores’ “financial statement” to H & W. FN3 Asa result, Plaintiffs’ assert that they lost their contractwith H & W. As discussed above, the sending of thenotice of a security interest to H & W was an act takenin anticipation of litigation which is protected by boththe Anti-SLAPP statute and the litigation privilege. Thelitigation privilege operates as an absolute bar to tortliability. Accordingly, the Fike Defendants’ motion tostrike this cause of action from the complaint isGRANTED.
FN3. As discussed, this was not a “financial statement”it was a standard-form UCC notice of secured interest.
7. Tenth Cause of Action for Conspiracy to Defraud.
Plaintiffs’ tenth cause of action alleges that the FikeDefendants conspired with other individual defendants(1) to cover up unlawful activities by filing acounterclaim against Plaintiffs in Flores I; and (2) tointerfere with Plaintiffs’ contractual businessrelationship with another fruit packing company.Specifically, the complaint also alleges that Emerich &Fike were paid more than $100,000.00 in attorneys feesto accomplish many of the allegedly “questionablebusiness transactions” described in the complaint.(Compl. at 510.) In response, the Fike Defendantsassert that they received only $10,000 from theirclients, with the remaining balance being paid out bythe clients’ insurer, Fireman’s Fund. (See David FikeDecl. at ¶ 8, Doc. 34).
As discussed above, California Civil Code § 1714operates to bar this cause of action completely, becausePlaintiffs failed to obtain a court order prior to filingthis conspiracy claim. The Fike Defendants’ motion tostrike the tenth cause of action is GRANTED.
8. Eleventh Cause of Action for Invasion ofPrivacy/Defamation.
Plaintiffs’ eleventh cause of action for invasion ofprivacy alleges that the Fike Defendants sent a copy ofthe Flores’ “financial statement” to H & W. Plaintiffsallege that this constituted an invasion of privacy anddefamation. As with the negligent interference withcontract claim, the sending of the notice of securedinterest to H & W was an act taken in anticipation oflitigation which is protected by both the Anti-SLAPPstatute and the litigation privilege. The litigationprivilege operates as an absolute bar to tort liability.Accordingly, the Fike Defendants’ motion to strike theeleventh cause of action is GRANTED.
B. Motion to Dismiss the Eighth Cause of action forCivil Racketeering in violation of 18 U.S.C. § 1961.
*20 Defendants move separately to dismiss the eighthcause of action (Civil Racketeering). Plaintiffs allegegenerally that the “Defendants” engaged inRacketeering to further the general goal ofmisappropriating funds belonging to the bankruptcyestate. Specifically, the complaint alleges that one of theDDJ Defendants committed mail fraud by mailingallegedly fraudulent documents prepared by one of theother DDJ defendants. As to the Fike Defendants, thecomplaint alleges generally that the Fike Defendantscommitted wire fraud by faxing allegedly falsedocuments to Plaintiffs during discovery in Flores I.(Compl. at ¶ 336.) Plaintiffs also conclusorily describethe allegedly false document. (Compl. at ¶ 389.)
A civil RICO complaint must at least allege: “(1)conduct (2) of an enterprise (3) through a pattern (4) ofracketeering activity (known as ‘predicate acts’) (5)causing injury to plaintiff’s ‘business or property.” ’ Living Designs, Inc. v. E.I. Dupont de Nemours andCo., 431 F.3d 353, 361 (9th Cir.2005) Here, Plaintiffsallege that the Fike Defendants violated sections1962(c) (conducting the affairs of a racketeeringenterprise) and (d) (conspiring to commit racketeering).The racketeering enterprise must exist independentlyfrom the acts of racketeering. Chang v. Chen, 80 F.3d1293, 1298-99 (9th Cir.1996). Assumedly, Plaintiffsclaim the law firm is a racketeering enterprise, althoughthey have not so alleged.
Section 1961 enumerates acts which are considered tobe “racketeering activity” (i.e., “predicate acts”).Included is “any act or threat involving murder,kidnapping, gambling, arson, robbery, bribery,extortion, dealing in obscene matter, or dealing in acontrolled substance or listed chemical (as defined inSection 102 of the Controlled Substances Act), whichis chargeable under State Law and punishable byimprisonment for more than one year.” § 1961(1)(A).Also included are any of more than twenty types ofconduct indictable under enumerated provisions of theUnited States Code, ranging from mail fraud and wirefraud, through robbery and extortion, to white slavetrade. § 1961(1)(B). Finally, a “predicate act” may alsobe established by any offense involving fraud“connected with” a bankruptcy case, “fraud in the saleof securities,” or any act related to a controlledsubstance or listed chemical “punishable’ under federallaw.” § 1961(1)(C).
Plaintiffs have failed to adequately allege facts thatshow the Fike Defendants committed a predicate act.Here, Plaintiffs conclusorily allege that the FikeDefendants engaged in a laundry-list of purportedpredicate acts: Theft From Interstate Shipments (18U.S.C. 659); Mail Fraud (1341); Wire Fraud (1342);Interstate and Foreign Travel to Aid in RacketeeringEnterprise (1952); Laundering of Monetary Instruments(1956); Engaging in Monetary Transactions in PropertyDerived from Specified Unlawful Activity (1957) andTrafficking in Counterfeit Goods (2320). (Compl. at ¶362, 367). However, Plaintiffs only mention the FikeDefendants in the context of Mail Fraud, Wire Fruad,and Engaging in Monetary Transactions in PropertyDerived From Specified Unlawful Activity.
*21 As a threshold matter, Federal Rule of CivilProcedure 9(b) applies to RICO Fraud allegations,including Mail Fraud and Wire Fraud. Moore v.Kayport Package Express, Inc., 855 F.2d 531, 541 (9thCir.1989). Rule 9(b) requires that the pleader state the“time, place, and specific content of the falserepresentations, as well as the identities of the parties tothe misrepresentation.” Plaintiffs have not met thisstandard here and the Mail Fraud and Wire Fraudclaims must be dismissed.
As to the allegation that the Fike Defendants engaged inMonetary Transactions in Property Derived FromSpecified Unlawful Activity, Plaintiffs have notproperly pled such a claim against the Fike Defendants.The elements of such an claim are: (1) the defendantengaged or attempted to engage, (2) in a monetarytransaction, (3) in criminally derived property that is ofvalue greater than $10,000.00, (4) knowing that theproperty is derived from unlawful activity, and (5) thatthe property is in fact derived from specified unlawfulactivity. Here, Plaintiffs allege that the Fike Defendantsreceived payment for services rendered as counsel tothe DDJ Defendants. Wholly absent from the complaintis any allegation that such payments were illegal orrepresented the proceeds of unlawful activity; or thatthe Fike Defendants knew this money was derived fromunlawful activity. This cannot serve as a predicateoffense under the RICO statute.
Moreover, even if Plaintiffs had alleged the commissionof a predicate act, Plaintiffs have in no way alleged thatthe Fike Defendants violated 1962(c) by conducting theaffairs of a racketeering enterprise that was independentof the racketeering acts. Chang, 80 F.3d at 1298-99. To“conduct or participate directly or indirectly in theconduct of such [an] enterprise [ ], one must participatein the operation or management of the enterprise. Revesv. Ernst & Young, 507 U.S. 170, 185, 113 S.Ct. 1163,122 L.Ed.2d 525 (1993) (finding that accounting firmcould not be liable under 1962(c) merely by beingassociated with the enterprise). See also Baumer v.Pachl, 8 F.3d 1341 (9th Cir.1993) (finding that adefendant attorney was not liable under 1962c eventhough he took numerous steps to perpetuate the allegedfraud, including the preparation of two letters designedto forestall and cover up the fraud). Plaintiffs have notalleged that the Fike Defendants participated in themanagement of DDJ.
Plaintiffs also allege that the Fike Defendants conspiredto violate RICO under 18 U.S.C.1962(d). But, thatprovision provides that “it shall be unlawful for anyperson to conspire to violate any of the provisions ofsubsection (a), (b) or (c) of this section.” There can beno RICO conspiracy without having committed a RICOviolation. Here, Plaintiffs’ allegations under 1962(c) areinsufficient, and their allegation under 1962(d) fails aswell.
*22 The Fike Defendants’ motions to strike and todismiss are GRANTED in their entirety. Any amendedcomplaint shall be filed within fifteen (15) daysfollowing service of this decision by the Clerk of Court.
Flores v. Emerich & Fike
— F.Supp.2d —-, 2006 WL 449101 (E.D.Cal.)
END OF DOCUMENT