Opinion
H048120
11-16-2022
RICHARD LEE FOUST, Cross-Complainant and Respondent, v. JEN HAO RICHARD CHEN, Cross-Defendant and Appellant.
NOT TO BE PUBLISHED
(Santa Clara County Super. Ct. No. 17CV319705)
Grover, J.
Cross-defendant Jen Hao Richard Chen challenges the trial court's denial of his special motion to strike a slander cause of action alleged in a cross-complaint by Richard Lee Foust. Chen brought his motion under California's "Anti-SLAPP" law (Code Civ. Proc., § 425.16), challenging the cause of action as "Strategic Litigation Against Public Participation." Finding no error, we will affirm.
BACKGROUND
La Encina Development, LLC (La Encina), contracted in February 2016 with Group One Construction, Inc. (Group One), to develop residential property in San Jose. The contract was terminated by La Encina in August 2017 after disputes arose over project plans, performance, and payment.
Group One recorded a mechanics lien against La Encina in the amount of $985,141. Group One filed for bankruptcy, and in November 2017 sued La Encina for breach of contract and to foreclose on the lien.
In February 2018, La Encina cross-complained against Group One and Richard Lee Foust (the president and CEO of Group One) for breach of contract, declaratory relief, constructive trust, and to pierce the corporate veil. The cross-complaint alleged Group One requested payment from La Encina without intending to pay the subcontractors; Group One failed to hold payments received from La Encina for the subcontractors' benefit; Group One failed to pay the subcontractors within seven days of receiving payment from La Encina; and Group One is not entitled to further payments until completion of the project.
In August 2019, Group One's Foust cross-complained against La Encina's owner, Richard Chen, alleging causes of action for intentional misrepresentation, negligent misrepresentation, slander per se, and alter ego. Regarding the slander cause of action, the cross-complaint alleged Foust was defamed by Chen and his project manager who repeatedly told project subcontractors and others that Foust failed to pay subcontractors despite having been paid by La Encina, failed to effectively manage the project, and performed defective workmanship. Foust alleged the statements were made during and after Group One's performance of the contract, including repeatedly for two to three months after the contract was terminated.
Chen moved to strike the slander cause of action under the anti-SLAPP law on grounds that the alleged defamatory statements were made "in connection with an issue under consideration or review by a . . . judicial body." (Code Civ. Proc., § 425.16, subd. (e)(2).) Chen argued that the statements were "made in connection with and in anticipation and/or furtherance of this litigation," and were therefore protected. He argued Foust could not demonstrate a probability of prevailing on the slander cause of action because the targeted speech was protected by the litigation and common interest privileges. The trial court denied the special motion to strike by written order after hearing, finding Chen failed to make a threshold showing that the slander cause of action arose from protected activity.
DISCUSSION
The anti-SLAPP statute is "designed to protect defendants from meritless lawsuits that might chill the exercise of their rights to speak and petition on matters of public concern." (Wilson v. Cable News Network, Inc. (2019) 7 Cal.5th 871, 883-884.) A person may file an anti-SLAPP motion to strike claims "arising from any act of that person in furtherance of the person's right of petition." (Code Civ. Proc., § 425.16, subd. (b)(1); unspecified statutory references are to the Code of Civil Procedure.) The statute defines" 'act in furtherance of a person's right of petition'" to include "any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law" (id., subd. (e)(2)), and may include prelitigation statements. (Flatley v. Mauro (2006) 39 Cal.4th 299, 322, fn. 11; Briggs v. Eden Council for Hope &Opportunity (1999) 19 Cal.4th 1106, 1115.)
In evaluating an anti-SLAPP motion, the trial court first determines whether the challenged cause of action arises from protected activity. (People ex rel. Fire Ins. Exchange v. Anapol (2012) 211 Cal.App.4th 809, 822 (Anapol).) If the moving defendant makes that prima facie showing, the plaintiff may defeat the motion by demonstrating a likelihood of prevailing on the merits. (Ibid.) In deciding whether a cause of action is subject to the provisions of section 425.16, the trial court must "consider pleadings, and the supporting and opposing affidavits stating the facts upon which the liability or defense is based." (Id., subd. (b)(2).) The parties' declarations are relevant to both prongs of the two-part test. (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67.) An order denying an anti-SLAPP motion is appealable, and our review is de novo. (§ 425.16, subd. (i); Anapol, at p. 822.)
"The anti-SLAPP protection for petitioning activities applies not only to the filing of lawsuits, but extends to conduct that relates to such litigation, including statements made in connection with or in preparation of litigation." (Kolar v. Donahue, McIntosh & Hammerton (2006) 145 Cal.App.4th 1532, 1537.) Courts have looked to the litigation privilege as an aid in construing the scope of section 425.16, subdivision (e)(2). (Flatley v. Mauro, supra, 39 Cal.4th 299, 322-323; Civ. Code, § 47, subd. (b) ["A privileged publication or broadcast is one made: [¶] (b) In any . . . judicial proceeding"].) The litigation privilege protects a communication" 'in furtherance of the objects of the litigation.'" (Action Apartment Assn., Inc. v. City of Santa Monica (2007) 41 Cal.4th 1232, 1251.) "This is 'part of the requirement that the communication be connected with, or have some logical relation to, the action, i.e., that it not be extraneous to the action.' [Citation.] A prelitigation communication is privileged only when it relates to litigation that is contemplated in good faith and under serious consideration." (Ibid.) The litigation privilege's "in good faith" and "seriously contemplated" inquiry has been used to evaluate prelitigation statements that do not intrinsically anticipate litigation. (RGC Gaslamp, LLC v. Ehmcke Sheet Metal Co., Inc. (2020) 56 Cal.App.5th 413, 429 (RGC Gaslamp); Neville v. Chudacoff (2008) 160 Cal.App.4th 1255, 1268 (Neville) [A statement which" 'concern[s] the subject of the dispute' and is made 'in anticipation of litigation "contemplated in good faith and under serious consideration," '" may be petitioning activity under § 425.16, subd. (e)(2)].)
Chen argues that he satisfied his threshold burden of showing the alleged statements are "made in connection" with civil litigation under section 425.16, subdivision (e)(2) because the statements were made following the contract's termination at the time La Encina was "embroiled in litigation with Group One's subcontractors and dealing with mechanic's liens and stop payment notices claiming hundreds of thousands of dollars of unpaid invoices." He notes that La Encina had filed creditor claims in the Group One bankruptcy action. He asserts it would be unreasonable to assume La Encina did not intend to sue for damages after terminating the contract, and Group One's subcontractors had an interest "in having a frank discussion as to why Group One and Foust had been terminated from the project." Chen points to his declaration, in which he states that as early as April 2017 "[w]e anticipated . . . that litigation between La Encina and Group One would be unavoidable," and before terminating the contract in August 2017 "we understood there would be litigation with Group One and Mr. Foust regarding the project and its termination." Chen also points to the allegations in Foust's cross-complaint, which in his view describe acts protected under section 425.16, subdivision (e)(2).
We reject the premise advanced by Chen that the alleged statements were made following the contract's termination. Foust's cross-complaint alleged the defamatory statements were made "both during Group One's performance of the Contract and thereafter." Foust stated in his declaration opposing the anti-SLAPP motion that the "attacks began on a regular and frequent basis starting in August 2016 and continued until La Encina terminated Group One's contract on August 15, 2017," and "occurred during the weekly meetings in Group One's work trailer on site . . . in front of multiple subcontractors and consultants."
The allegations in Foust's cross-complaint do not establish that the defamatory statements were made in connection with the lawsuit La Encina filed against Global One in February 2018 (or Global One's November 2017 lawsuit against La Encina). Nor does Chen's declaration establish that the statements were made in connection with litigation. Chen did not state that he was having "frank discussions" with the subcontractors about Group One's performance in contemplation of initiating or defending litigation. To the contrary, Chen denied having spoken with the subcontractors, and he presented no evidence that prelitigation discussions were undertaken by Chen's project manager. According to Foust, the statements were made on-site during weekly meetings. Neither party asserts that attorneys were present at these meetings, or that the purpose of these meetings was to discuss anticipated or imminent litigation.
We are not persuaded by the authorities Chen attempts to apply in this context. Rohde v. Wolf (2007) 154 Cal.App.4th 28 involved a defamation suit based on a voicemail message left by an attorney representing a decedent's son accusing a real estate agent of conspiring with the decedent's daughter to deprive the son of his interest in a property in the decedent's estate. (Id. at pp. 33-34.) The appellate court concluded that the message was protected under the anti-SLAPP statute because it was made at a time when litigation was" 'contemplated in good faith and under serious consideration.'" (Id. at p. 37.) The son and daughter had been embroiled in a dispute concerning the distribution of their deceased father's assets; both had hired attorneys to protect their interests; the daughter's attorney had detailed the lawsuit he intended to file in a letter to defendant which resulted in an agreement to sell the property in question; and the son's attorney's allegedly defamatory voicemail message referenced his stated intention to take "appropriate action." (Id. at p. 36.)
Neville, supra, 160 Cal.App.4th 1255 involved litigation by an employer against a former employee. Several months before filing suit, counsel for the employer wrote to the employer's customers accusing the employee of breach of contract and misappropriating trade secrets, and suggesting the customers not do business with the former employee "to avoid potential involvement in any ensuing litigation 'as a material witness, or otherwise.'" (Id. at p. 1259.) The appellate court found the letter was protected under the anti-SLAPP statute because it was "directly related to the employer's claims against the employee, and the employer was seriously and in good faith contemplating litigation against the employee." (Ibid.) The court rejected arguments that the letter did not "expressly declare" the employer was contemplating litigation and the letter was not addressed to parties to the anticipated lawsuit. (Id. at p. 1262.)
The protected communications in Rohde and Neville were made by attorneys representing parties in ongoing disputes, and they included express references to anticipated litigation. (Accord Healy v. Tuscany Hills Landscape &Recreation Corp. (2006) 137 Cal.App.4th 1, 4 [letter by counsel for a homeowner's association was written in connection with judicial proceedings where it was addressed to association members after the association filed suit against a homeowner for injunctive relief and informed the members of the pending litigation]; Contemporary Services Corp. v. Staff Pro Inc. (2007) 152 Cal.App.4th 1043, 1055 [company president's e-mail to clients informing them of status of litigation with competitor was protected activity]; cf. Anapol, supra, 211 Cal.App.4th 809, 827 [insurance claim submitted as "a necessary prerequisite to expected litigation or . . . as the equivalent of a prelitigation demand letter . . . may constitute protected petitioning activity"]; RGC Gaslamp, supra, 56 Cal.App.5th 413, 430 [mechanics lien recorded as a necessary prerequisite to a foreclosure action "is protected as conduct preparatory to or in anticipation of litigation"].)
In contrast here, the statements at issue were made by Chen and his project manager in a nonlegal setting and without any reference to preparing for or anticipating litigation. Chen's personal "understanding" regarding future litigation is insufficient to establish a prima facie showing of protected activity. (Anapol, supra, 211 Cal.App.4th 809, 830 [self-serving attorney declaration that "in his own mind, at the time he submitted the [insurance] claims, his mindset was that the claims would likely be denied and litigation would be necessary" is insufficient for a prima facie showing of protected activity].)
In Sylmar Air Conditioning v. Pueblo Contracting Services, Inc. (2004) 122 Cal.App.4th 1049, a youth organization sued a general contractor (Pueblo) for breach of contract and negligence in connection with building renovations. (Id. at pp. 1052-1053.) The complaint alleged construction deficiencies in the HVAC system provided by Sylmar. (Id. at p. 1059.) Several months into the lawsuit, Pueblo's attorney and operations manager made allegedly fraudulent statements to Sylmar related to the allegations in the club owner's complaint. (Id. at pp. 1058-1059.) Sometime thereafter, Pueblo filed a cross-complaint against Sylmar, after which Sylmar sued Pueblo for fraud in connection with the statements made by Pueblo's attorney and operations manager. (Id. at p. 1053.) Sylmar prevailed on its anti-SLAPP motion on the fraud cause of action.
The appellate court noted that the alleged fraudulent statements were made during the course of litigation initiated by the youth organization which alleged defective workmanship on the part of the subcontractor. (Id. at p. 1059.) Thus, the fact that the parties' cross-complaints had not yet been filed was irrelevant. (Ibid.) In contrast to Sylmar where the communications were made in direct response to and in an effort to resolve litigation, the alleged defamatory statements here were made before any lawsuits were initiated. We understand several subcontractors filed mechanics liens against La Encina before the contract was terminated. While those subcontractor filings may be protected pre-litigation activity (RGC Gaslamp, supra, 56 Cal.App.5th 413, 430), they do not act to insulate the on-the-job statements alleged here.
Given our conclusion that Chen has failed in his prima facie showing, we need not address Chen's arguments concerning the sufficiency of Foust's opposition to the motion. Nor do we reach the argument that Foust's slander cause of action is time-barred: after Chen's anti-SLAPP motion was filed, Foust filed a first amended cross-complaint realleging slander per se; Chen demurred based on failure to state a claim and statute of limitations grounds; and the trial court stayed consideration of the demurrer pending resolution of this appeal.
DISPOSITION
The order denying the special motion to strike is affirmed. Foust is awarded his costs on appeal by operation of California Rules of Court, rule 8.278(a).
WE CONCUR: Greenwood, P.J., Lie, J.