California Anti-SLAPP Project


Court of Appeal, Fourth District, Division 3,California.


A.F. BROWN ELECTRICAL CONTRACTOR,INC., Plaintiff and Respondent,

v.

RHINO ELECTRIC SUPPLY, INC., et al.,Defendants and Appellants.


No. G035694.


March 23, 2006.


 Appeal from an order of the Superior Court of OrangeCounty, Eleanor M. Palk, Temporary Judge. (Pursuantto Cal. Const., art. VI, § 21.) Affirmed.


 Hollins • Schechter and Kenneth C. Jones forDefendants and Appellants.


 Law Office of Amanda J. Potier, Amanda J. Potier andKaren L. Van Zee for Plaintiff and Respondent.


OPINION

 

 ARONSON, J.


 *1 Defendants Rhino Electric Supply, Inc., and TomBentele appeal the trial court's denial of their specialmotion to strike brought under the anti-SLAPP statute [FN1] (Code Civ. Proc., § 425.16). [FN2] Defendantscontend their filing of a stop notice and other debtcollection efforts constituted acts "in furtherance of theperson's right of petition or free speech under theUnited States or California Constitution in connectionwith a public issue," (§ 425.16) and were absolutelyprivileged under the litigation privilege of Civil Codesection 47, subdivision (b). Defendants also contendplaintiff A.F. Brown Electrical Contractor, Inc.,(Brown) failed to demonstrate a probability of successbecause its evidence of damage is based solely onhearsay statements. Accordingly, the defendantscontend the trial court erred by not striking Brown'slawsuit for libel, slander, and unfair business practices.

 

FN1. SLAPP is acronym for strategic lawsuitagainst public participation, first coined bytwo University of Denver professors. (SeeComment, Strategic Lawsuits Against PublicParticipation: An Analysis of the Solutions(1990/1991) 27 Cal. Western L.Rev. 399.)

 

FN2. Unless otherwise indicated, all furtherstatutory references are to the Code of CivilProcedure.


 We reject defendants' argument their actions wereabsolutely privileged as a matter of law because theyfailed to demonstrate that they made the challengedcommunications in connection with potential litigationthat was given serious consideration and contemplatedin good faith. Because defendants failed to establishtheir actions fell within the anti-SLAPP statute, we neednot consider whether Brown demonstrated a probabilityof success. Accordingly, we conclude the trial court didnot err in denying defendants' motion.


I


FACTUAL AND PROCEDURAL BACKGROUND


 Brown, an electrical contractor, was hired to performservices on a project for the Fountain Valley SchoolDistrict. In July 2003, Brown issued two purchaseorders to the defendants, one in the amount of $77,000for "wiremold" and one in the amount of $48,000 forother materials. The order called for defendants to storethe material in trailers at three different school sites.The purchase orders were subject to the school district'sapproval.


 Before receiving district approval for the purchaseorders, one of defendants' former employees informedBrown that defendants had grossly inflated the purchaseorder prices as part of an alleged kickback schemebetween defendants and one of Brown's employees.Brown cancelled the two purchase orders, reviewed theinvoices for materials previously provided, andconcluded defendants had overcharged it by $3,000.After deducting this amount, Brown paid defendants theremaining balance it believed was due, $2,624.31.Defendants assert, however, Brown owed additionalmonies, and in March 2004, issued two stop notices tothe district for amounts of $4,075.94 and $1,845.86,respectively. Defendants used a collection agency topursue a claim against Brown's surety bond, and,according to Brown, defendants also filed a derogatorycredit report against Brown with Dun & Bradstreet.


 In September 2004, Brown filed its initial complaintand, in January 2005, filed its first amended complaintfor libel, slander, and unfair business practices.Defendants then filed a special motion to strike undersection 425.16, which the trial court denied. Defendantsnow appeal this ruling.


II


STANDARD OF REVIEW


 *2 An order granting an anti-SLAPP motion to strikeis appealable. (§ 425.16, subd. (i).) We review a trialcourt's ruling on a motion to strike under section 425.16de novo, "conducting an independent review of theentire record." (HMS Capital, Inc. v. Lawyers Title Co.(2004) 118 Cal.App.4th 204, 212 (HMS ).)


III


DISCUSSION


 A. The Challenged Communications Were NotStatements or Writings Made Before a JudicialProceeding, or Made In Connection With an IssueUnder Consideration or Review by a Judicial Body


 1. Clauses (1) and (2) of Section 425.16, Subdivision(e) Are Coextensive With the Litigation Privilege


 Section 425.16 provides: "A cause of action against aperson arising from any act of that person in furtheranceof the person's right of petition or free speech under theUnited States or California Constitution in connectionwith a public issue shall be subject to a special motionto strike, unless the court determines that the plaintiffhas established that there is a probability that theplaintiff will prevail on the claim." (§ 425.16, subd.(b)(1).)


 To prevail on an anti-SLAPP motion, the movant mustfirst make " 'a threshold showing the challenged causeof action' arises from an act in furtherance of the rightof petition or free speech in connection with a publicissue." (Varian Medical Systems, Inc. v. Delfino (2005)35 Cal.4th 180, 192.) Once the movant meets thisburden, the plaintiff must demonstrate " 'a probabilityof prevailing on the claim.' " (Ibid.) If plaintiff fails todo so, the cause of action must be stricken. (Ibid.)


 The anti-SLAPP statute authorizes the court to strike acause of action, but unlike motions to strike undersection 436, it cannot be used to strike particularallegations within a cause of action. (Fox SearchlightPictures, Inc. v. Paladino (2001) 89 Cal.App.4th 294,308.) Thus, to meet their burden, defendants need notprove that all of the acts alleged in a cause of action fallwithin the anti-SLAPP statute. A cause of actioncontaining allegations of both protected andunprotected conduct is subject to a special motion tostrike under section 425.16 unless the protected conductis " 'merely incidental' " to the unprotected conduct.(Mann v. Quality Old Time Service, Inc. (2004) 120Cal.App.4th 90, 103 (Mann ); Scott v. MetabolifeInternat., Inc. (2004) 115 Cal.App.4th 404, 419.) [FN3] In other words, where a cause of action is basedon allegations that include protected and nonprotectedactivities, the cause of action is subject to theanti-SLAPP statute only if the protected conduct formsa substantial part of the factual basis for the claim.(Mann, at p. 104.) Once the defendant has met itsburden of demonstrating a substantial part of a cause ofaction falls within section 425.16, the plaintiff needonly demonstrate that the cause of action has somemerit. (Mann, at p. 106 ["a court need not engage in thetime-consuming task of determining whether theplaintiff can substantiate all theories presented within asingle cause of action"].)

 

FN3. The California Supreme Court recentlyhas granted review of a case which squarelyaddresses this issue. (See Kids AgainstPollution v. California Dental Association,review granted Sept. 17, 2003, S117156.)


 *3 Brown's causes of action for libel and unfairbusiness practices are each based on three distinct actsby defendants: (1) Issuing stop notices to the district;(2) informing the collection agency that Brown oweddefendants money; and (3) making a derogatory creditreport to Dun & Bradstreet. Brown's cause of action forslander relies only on the communication with thecollection agency and the derogatory credit report.


 Section 425.16, subdivision (e), instructs that an " 'actin furtherance of a person's right of petition or freespeech under the United States or CaliforniaConstitution in connection with a public issue' includes:(1) any written or oral statement or writing made beforea legislative, executive, or judicial proceeding, or anyother official proceeding authorized by law; (2) anywritten or oral statement or writing made in connectionwith an issue under consideration or review by alegislative, executive, or judicial body, or any otherofficial proceeding authorized by law; (3) any written ororal statement or writing made in a place open to thepublic or a public forum in connection with an issue ofpublic interest; (4) or any other conduct in furtheranceof the exercise of the constitutional right of petition orthe constitutional right of free speech in connectionwith a public issue or an issue of public interest." If thedefendant's alleged acts fall under the first two prongsof section 425.16, subdivision (e), the defendant is notrequired to independently demonstrate that the matter isa "public issue." (Navarro v. IHOP Properties, Inc.(2005) 134 Cal.App.4th 834, 842-843 (Navarro ).)


 It is beyond dispute the filing of a complaint is anexercise of the constitutional right of petition and fallsunder section 425.16. (Kajima Engineering &Construction, Inc. v. City of Los Angeles (2002) 95Cal.App.4th 921, 929 (Kajima ).) Section 425.16 mayalso apply to conduct that relates to such litigation.(Kashian v.. Harriman (2002) 98 Cal.App.4th 892, 908(Kashian ).) Courts have adopted a "fairly expansiveview" of litigation-related conduct to which section425.16 applies. (Kashian, at p. 908.) Moreover,"clauses (1) and (2) of section 425.16, subdivision (e)... are coextensive with the litigation privilege of CivilCode section 47, subdivision (b)." (Ruiz v. Harbor ViewCommunity Ass'n. (2005) 134 Cal.App.4th 1456, 1467,fn. 3.) Thus, " '[j]ust as communications preparatory toor in anticipation of the bringing of an action or otherofficial proceeding are within the protection of thelitigation privilege of Civil Code section 47,subdivision (b) [citation], ... such statements are equallyentitled to the benefits of section 425.16.' " (Briggs v.Eden Council for Hope & Opportunity (1999) 19Cal.4th 1106, 1115 (Briggs ).)


 In recognition of this principle, defendants' primaryargument on appeal is that they made the challengedcommunications in anticipation of the filing of acollection action, and therefore their statements fellwithin the litigation privilege. They rely on thelitigation privilege both to demonstrate their initialburden of showing that each cause of action falls withinthe anti-SLAPP statute, and to defeat any showing byBrown its causes of action have merit.


 *4 The litigation privilege shields any "publication orbroadcast" made "[i]n any ... judicial proceeding."(Civ.Code, § 47, subd .(b).) "The litigation privilege isabsolute; it applies, if at all, regardless whether thecommunication was made with malice or the intent toharm. [Citation.] Put another way, application of theprivilege does not depend on the publisher's 'motives,morals, ethics or intent.' [Citation.] Although originallyapplied only to defamation actions, the privilege hasbeen extended to any communication, not just apublication, having 'some relation' to a judicialproceeding, and to all torts other than maliciousprosecution. [Citations.] Moreover, '[t]he litigationprivilege is not limited to the courtroom, butencompasses actions by administrative bodies andquasi-judicial proceedings. [Citation.] The privilegeextends beyond statements made in the proceedings,and includes statements made to initiate official action.[Citation.].... [']" (Kashian, supra, 98 Cal.App.4th at p.913.)


 Under the " 'usual formulation,' " the litigation "'privilege applies to any communication (1) made injudicial or quasi-judicial proceedings; (2) by litigants orother participants authorized by law; (3) to achieve theobjects of the litigation; and (4) that have someconnection or logical relation to the action. [Citations.]'[Citation.]" (Sylmar Air Conditioning v. PuebloContracting Services, Inc. (2004) 122 Cal.App.4th1049, 1058.) The privilege extends to "any publication... that is required [citation] or permitted [citation] bylaw in the course of a judicial proceeding to achieve theobjects of the litigation, even though the publication ismade outside the courtroom and no function of thecourt or its officers is invoked." (Albertson v. Raboff(1956) 46 Cal.2d 375, 380-381 (Albertson ).)Accordingly, courts have extended the privilege to thesending of a prelitigation demand letter (Aronson v.Kinsella (1997) 58 Cal.App.4th 254, 260-261(Aronson)); recording of a notice of lis pendens (Albertson,supra, at p. 381); publishing of an assessment lien(Wilton v. Mountain Wood Homeowners Assn., Inc.(1993) 18 Cal.App.4th 565, 570 (Wilton )); filing of ahospital lien (Olszewski v. Scripps Health (2003) 30Cal.4th 798; and filing of a mechanic's lien (FrankPisano & Associates v. Taggart (1972) 29 Cal.App.3d1, 25).


 Brown, however, argues the litigation privilege doesnot apply because (1) stop notices, unlike liens, are notsubject to the litigation privilege, and (2) defendantsnever filed any lawsuit seeking to collect fundsallegedly due Rhino; therefore, publication of the stopnotices and communications to the collection agencywere not made in a judicial proceeding.


 2. The Litigation Privilege Applies to Stop Notices


 In making the first argument, Brown attempts todistinguish between a mechanic's lien, which may befiled in a private work of improvement, and a stopnotice, which may be filed on a public work project.True, as Brown points out, a stop notice does not createa lien on the work of improvement or the land on whichit is situated, but instead requires the public agency towithhold from the general contractor money or bonds inan amount sufficient to satisfy the stop notice claimsand the reasonable cost of any ensuing litigation.(Civ.Code, § 3186.) That distinction, however, isirrelevant for purposes of the litigation privilege.



 *5 "[T]he filing of a mechanic's lien is privilegedbecause the claim of lien is authorized by law andrelated to an action to foreclose." (Wilton, supra, 18Cal.App.4th at p. 569.) In a similar manner, stop noticesare authorized by law and relate to an action forcollection. Specifically, Civil Code section 3184requires a claimant subcontractor to serve a stop noticewithin (a) 30 days after a notice of completion orcessation is filed, or (b) 90 days after actual completionor cessation if no notice is filed. (Civ.Code, § 3184.)The stop notice claimant may then file an action againstthe general contractor and the public entity to enforcethe stop notice at any time after 10 days from theservice of the stop notice until 90 days followingexpiration of the time in which a stop notice must befiled. (Civ.Code, § 3210.)


 Although there are differences between the proceduresfor mechanic's liens and stop notices, they are both partof the California lien law scheme. As recognized inSunlight Electric Supply Company v. McKee (1964)226 Cal.App.2d 47, 50: "The mechanic's lien lawincluding the stop-notice provisions is an integrated andharmonious scheme and applicable code sections mustbe construed together. It 'is remedial in character, andshould be liberally construed in its entirety with a viewto effect its objects and to promote justice.' [Citations.]There would seem to be no cogent reason why all rulesapplicable to both should not apply with equal effect toboth in the absence of specific legislative mandate tothe contrary."


 Brown has offered no convincing reason why stopnotices should be treated differently from a mechanic'slien for purposes of the litigation privilege, and we candiscern none.


 3. The Litigation Privilege Protects PrelitigationCommunications Only If Litigation Was Contemplatedin Good Faith and Given Serious Consideration at theTime Defendant Made the Communication


 Although the litigation privilege is absolute whereapplicable, the privilege protects only prelitigationcommunications having some relation to an anticipatedlawsuit. (Aronson, supra, 58 Cal.App.4th at p. 262.) "InCalifornia, the courts have held a prelitigation statementis protected by the litigation privilege of section 47,subdivision (b) when the statement is made inconnection with a proposed litigation that is'contemplated in good faith and under seriousconsideration. [Citation.]' [Citations.]" (Ibid.) In otherwords, the prelitigation statements must " 'have someconnection or logical relation to the action....' " (Id. atp. 266.)


 In support of their special motion to strike, defendantssubmitted declarations demonstrating the validity ofBrown's debt, and that the stop notices and collectionefforts were simply intended to collect the amountowed. Although these declarations are sufficient,standing alone, to demonstrate defendants' good faithbelief in a legally viable claim, they utterly fail todemonstrate the acts were taken when litigation wasunder serious consideration. Indeed, the closest thedeclarations come to a discussion of contemplatedlitigation is the statement that Rhino informed Brownthat if it failed to remit payment by a specified deadline,Rhino would issue the stop notices "and pursue allavailable legal remedies." This threat of potential legalaction is insufficient, however, to demonstrate a lawsuitwas under serious consideration.


 *6 Because defendants failed to establish that a lawsuitwas under serious consideration, they failed todemonstrate the litigation privilege covered thechallenged communications.


 B. Defendants Fail to Demonstrate the DisputedCommunications Fall Under Any Other Provisions ofthe Anti-SLAPP Statute


 Defendants also argue that their issuance of the stopnotices constituted a "written ... statement ... madebefore ... any other official proceeding authorized bylaw ...." (§ 425.16, subd. (e)(1).) In other words,defendants contend they filed the stop notices not onlyin anticipation of court litigation, but also as part of aseparate "official proceeding" before the school district.We disagree.


 Not all writings submitted to a government agency foraction fall within the ambit of the anti-SLAPP statute.For example, the submission of bids to a city to obtaina construction contract, and written requests forpayment under such a contract fall outside the scope ofthe anti-SLAPP statute. (Kajima, supra, 95 Cal.App.4that p. 932.) Similarly, communications made inconnection with bids submitted in a government auctionare not protected. (Blackburn v.. Brady (2004) 116Cal.App.4th 670, 677.) Each such an act is a "purelybusiness type event or transaction and is not the type ofprotected activity contemplated under section 425.16,subdivision (e)." (Ibid.)


 To find protection, the challenged communicationsmust be made before "an official proceeding." Forexample, allegedly defamatory comments made inconnection with ongoing proceedings held by theDepartment of Housing and Urban Development havebeen held to fall within the anti-SLAPP statute. (SeeBriggs, supra, 19 Cal.4th at p. 1115.) Similarly, acomplaint to the Attorney General requesting aninvestigation also was protected, even though noinvestigation was then in progress. (Dove Audio, Inc. v.Rosenfeld, Meyer & Susman (1996) 47 Cal.App.4th777, 784,)


 In the present situation, however, there was no "officialproceeding" in progress or requested by defendantswhen they submitted their stop notices. The stop noticesrequired the school district to withhold part of the fundsdue the general contractor until a court intervened todetermine to whom the payment would be made, or thetime for filing such an action passed. (See Civ.Code, §§3201, 3210.) The stop notices did not request thedistrict to commence any type of proceeding, or tomake any type of administrative or adjudicatorydecision. As discussed above, the defendants' filing ofthe stop notices is little different from a subcontractorwho files a mechanics lien on a private project. Such anact is protected under the anti-SLAPP statute only ifdone when a lawsuit related to that act wascontemplated in good faith and given seriousconsideration. (Aronson, supra, 58 Cal.App.4th at p.262.)


 Finally, defendants contend the stop notices fall withinthe scope of "any other conduct in furtherance of theexercise of the ... constitutional right of free speech inconnection with a public issue or an issue of publicinterest." (§ 425.16, subd. (e)(4).) Again, we disagree.


 *7 Unlike conduct falling within clauses (1) and (2) ofsection 425.16, subdivision (e), conduct falling withinclauses (3) and (4) requires an independent showingthat it was done "in connection with a public issue or anissue of public interest." (Navarro, supra, 134Cal.App.4th at p. 840.) Defendants do not articulatehow the stop notices at issue had any connection to apublic issue or issue of public interest. Because the stopnotices concerned only a private dispute between anelectrical contractor and its subcontractor, section425.16, subdivision (e)(4), does not apply.


 Because defendants failed to meet their initial burden,we need not consider whether Brown demonstrated aprobability of success. Accordingly, we conclude thetrial court did not err in denying their special motion tostrike.


IV


DISPOSITION


 The order is affirmed.


ORDER MODIFYING OPINION AND GRANTINGREQUEST FOR PUBLICATION

 Pursuant to California Rules of Court, rule 978, therequest of appellant Rhino Electric Supply, Inc. and itscounsel for publication of the opinion, filed onFebruary 21, 2006, in the above-entitled appeal isGRANTED.


 The opinion is ordered published in the OfficialReports. In addition, the opinion is hereby modified asfollows:


 1. On page 2, first paragraph, line 3, the followingfootnote is added immediately following the term "stopnotice":

A stop notice is a procedural device available to asubcontractor who claims money is due from thegeneral contractor on a public project. The stopnotice requires the public agency to withhold the fullamount of the subcontractor's claim from sumsotherwise due the general contractor, unless the latterposts a bond for 125 percent of the claim. (Civ.Code,§ 3179 et seq.).


 2. On page 3, the first sentence, which begins "Brown,an electrical contractor," is deleted and replaced withthe following:

The Fountain Valley School District hired Brown toperform a variety of electrical services.


 2. On page 3, second paragraph, line 5, the word "it" isreplaced by "the company" in the phrase "defendantshad overcharged it by" so that the sentence reads:

Brown cancelled the two purchase orders, reviewedthe invoices for materials previously provided, andconcluded defendants had overcharged the companyby $3,000.


 3. On page 3, third paragraph, the first sentence whichbegins with the phrase "In September 2004, Brownfiled its" is deleted and replaced with the following:

In September 2004, Brown filed an initial complaintand, in January 2005, filed a first amended complaintfor libel, slander, and unfair business practices.


 4. On page 4, first paragraph, first sentence, the word"granting" in the phrase "order granting an anti-SLAPPmotion" is deleted and replaced with the word"denying" so that the sentence reads as follows:

An order denying an anti-SLAPP motion to strike isappealable.


 5. On page 5, the first paragraph, which begins "Theanti-SLAPP statute authorizes the court" is deleted andthe following paragraph is inserted in its place:

*8 The anti-SLAPP statute authorizes the court tostrike a cause of action, but unlike motions to strikeunder section 436, it cannot be used to strikeparticular allegations within a cause of action. (FoxSearchlight Pictures, Inc. v. Paladino (2001) 89Cal.App.4th 294, 308.) Thus, to meet their burden,defendants need not prove that all of their actsalleged in a cause of action fall within theanti-SLAPP statute's protection. (Mann v. QualityOld Time Service, Inc. (2004) 120 Cal.App.4th 90,103 (Mann ); Scott v. Metabolife Internat., Inc.(2004) 115 Cal.App.4th 404, 419.) Nevertheless,where a cause of action is based on allegations thatinclude protected and nonprotected activities, thecause of action is vulnerable to a special motion tostrike under the anti-SLAPP statute only if theprotected conduct forms a substantial part of thefactual basis for the claim. (Mann, at p. 104.) If thedefendant meets its burden on this score, the plaintiffneed only demonstrate the cause of action has somemerit. (Id. at p. 106 ["a court need not engage in thetime-consuming task of determining whether theplaintiff can substantiate all theories presented withina single cause of action"].)


 These modifications do not change the judgment.


 WE CONCUR: SILLS, P.J., and RYLAARSDAM, J.


 --- Cal.Rptr.3d ----, 2006 WL 746205 (Cal.App. 4Dist.)


END OF DOCUMENT