Opinion
G037290
6-13-2007
SPM, INC., et al., Plaintiffs and Appellants, v. BERGER KAHN, Defendant and Respondent.
John M. Boyko for Plaintiffs and Appellants. Berger Kahn and Allen L. Michel for Defendant and Respondent.
NOT TO BE PUBLISHED
The plaintiffs in this action, SPM, Inc., KPOD, Ltd., KAC, Inc., M&B Partners, Irenemarie Kennedy, and John F. Kennedy (hereafter, collectively the Appellants), are all affiliated with or related to an individual named Sailor J. Kennedy. The defendant, Berger Kahn, is a law corporation, which has a $355,000 judgment against Sailor Kennedy and one of his companies, Kennecorp Mortgage Brokers, Inc. (Kennecorp), for unpaid legal fees. In accordance with Code of Civil Procedure section 708.410, Berger Kahn filed a notice of judgment lien in an unrelated pending lawsuit in which the Appellants and Kennecorp were plaintiffs. When the existence of Berger Kahns lien caused a hoped for settlement to unravel, the Appellants sued Berger Kahn for negligent and intentional interference with prospective economic advantage. The trial court granted Berger Kahns special motion to strike the complaint as a strategic lawsuit against public participation, i.e., "SLAPP" suit (§ 425.16). On appeal, the Appellants contend their action was not properly subject to an anti-SLAPP motion and they presented sufficient evidence they had a probability of prevailing. We reject their contentions and affirm the judgment.
FACTS
The Berger Kahn Action/Default Judgment
In December 1999, Berger Kahn obtained a default judgment for $355,616 in Orange County Superior Court case No. 811982, against Sailor Kennedy and his corporation, Kennecorp, for unpaid legal fees. The judgment remains unsatisfied.
The PBA Action
In the late 1990s, various Sailor Kennedy-affiliated parties were involved in litigation in Los Angeles County Superior Court (case No. TC010027), known as the PBA litigation, concerning the acquisition and sale of a hotel (hereafter, the PBA Action). The Sailor Kennedy-affiliated defendants in the PBA Action included all the parties relevant to the present case: Sailor Kennedy himself; Irenemarie Kennedy and John Kennedy (who are Sailor Kennedys children); KAC (an Ohio corporation owned by Irenemarie Kennedy and John Kennedy); M&B (an Ohio general partnership owned by Sailor Kennedy and Patrick Millican); SPM (an Ohio corporation owned by Millican and his mother); KPOD (an Ohio limited liability company whose members are KAC, SPM and Sailor Kennedy); and Kennecorp (an Ohio corporation owned by Sailor Kennedy). Sailor Kennedy was the "advisor" to KPOD and Kennecorp. All the Sailor Kennedy-affiliated defendants in the PBA Action, except for Sailor Kennedy and Millican as individuals (who both appeared in propria persona in that action), were represented in that litigation by attorney Clifford Roberts.
In a statement of decision issued by the referee in the PBA Action on accounting issues, the referee made the following findings concerning the Kennedy-affiliated defendants—namely, KPOD, KAC, M&B, and Kennecorp, were alter egos of Sailor Kennedy; Sailor Kennedy, Irenemarie Kennedy, KPOD, KAC, M&B, Kennecorp, and Millican constituted a single enterprise; and Sailor Kennedy "was the backbone and controlling force behind the individuals and entities constituting the single enterprise . . . ." The referees findings were made part of the statement of decision issued by the trial court in the PBA Action.
The Roberts Action/Berger Kahns Judgment Lien
In the fall of 2000, the Kennedy-affiliated individuals and entities that had been represented by Roberts in the PBA Action sued Roberts for legal malpractice in connection with the PBA Action. (Orange County Superior Ct. case No. 00CC11368, hereafter, the Roberts Action.) The plaintiffs in the Roberts Action were SPM, KPOD, KAC, M&B, Irenemarie Kennedy, John Kennedy, and Kennecorp. The causes of action were all pled jointly on behalf of all the named plaintiffs.
In April 2002, Berger Kahn filed a Judicial Council-approved form notice of judgment lien (under section 708.410) in the pending Roberts Action. The notice listed Sailor Kennedy and Kennecorp as the judgment debtors and stated the lien amount of $355,616. The form notice of lien contained statutorily mandated language including that the lien attached to the judgment debtors interests in the pending action, and no settlement of the judgment debtors interests in the pending action could be entered into unless: (1) the judgment creditors lien was satisfied; or (2) the judgment creditor consented to the proposed settlement; or (3) the court in which the action is pending has approved the proposed settlement. (§ 708.420, subds. (f) & (g).)
The Current Action
The Appellants in the current action are all the plaintiffs in the Roberts Action except Kennecorp. The Appellants asserted causes of action against Berger Kahn for negligent and intentional interference with prospective economic advantage. The complaint alleged all the plaintiffs in the Roberts Action (including Kennecorp) had come to "an agreement in principle" to settle the action for $501,000. They had agreed to submit to "binding arbitration" the determination of how the proposed settlement amount would be allocated between all the Roberts Action plaintiffs. The allocation the arbitrator came up with was as follows: KPOD, $175,350; KAC, $75,150; SPM, $ 75,150; Irenemarie Kennedy, $75,150; John Kennedy, $75,150; Kennecorp, $12,525; and M&B, $12,525. The plaintiffs alleged Kennecorp and Sailor Kennedy had agreed the amounts allocated to Kennecorp and one-half of the amount allocated to M&B (in which Sailor Kennedy was one of the two partners) would be withheld from the settlement proceeds to satisfy Berger Kahns judgment lien. Despite having knowledge of the terms on which the Roberts Action was going to be settled, Berger Kahn negligently and intentionally "misrepresented the law" by insisting Berger Kahns notice of lien precluded the Roberts Action defendants from disbursing any settlement proceeds to any of the Appellants. As a result, the proposed settlement fell apart.
The Anti-SLAPP Motion
On March 22, 2006, Berger Kahn filed a special motion to strike the complaint under section 425.16 (anti-SLAPP motion). It asserted the complaint was properly subject to an anti-SLAPP motion because the causes of action arose out of acts taken in furtherance of its petition rights, i.e., filing a statutorily authorized notice of judgment lien in a pending action. It also asserted the Appellants would be unable to demonstrate a probability of prevailing because the notice of lien was filed in accordance with law, the Appellants had not availed themselves of the statutory methods for obtaining approval of the proposed settlement, and the alleged actions were protected by the litigation privilege of Civil Code section 47, subdivision (b).
In support of its motion, Berger Kahn submitted various court documents related to the PBA Action, the complaint in the Roberts Action, and its judgment and the notice of lien in the Berger Kahn action. Berger Kahn provided its attorneys declaration, stating Berger Kahn was never given notice of or asked to participate in any settlement discussions concerning the Roberts Action. Berger Kahns attorney received a telephone call during a mediation session asking Berger Kahn to consent to the settlement, but the financial terms or structure of the settlement were not disclosed and thus, Berger Kahn had no way of knowing whether "the settlement was fair or collusive." The attorney was mindful of the fact that in the underlying PBA Action, the court had made specific factual findings the Sailor Kennedy-affiliated defendants (most of whom were the plaintiffs in the Roberts Action) were alter egos of or part of a single enterprise controlled by Sailor Kennedy. None of the parties to the Roberts Action ever filed a noticed motion seeking court approval of the proposed settlement in the Roberts Action.
On April 7, 2006, the Appellants filed a first amended complaint. The factual allegations were substantially the same. The new complaint added causes of action for abuse of process, and negligent and intentional infliction of emotional distress.
On April 17, 2006, the Appellants filed their opposition to the anti-SLAPP motion. They contended the complaint was not subject to an anti-SLAPP motion because it did not arise out of Berger Kahns exercise of its petition rights. The gravamen of the complaint was not that Berger Kahn improperly filed the notice of lien, but rather that Berger Kahn improperly used the lien to thwart the nonjudgment debtor plaintiffs in the Roberts Action (i.e., the Appellants) from settling. Irenemarie Kennedy submitted her declaration, stating she and her brother, John Kennedy, were the owners of all the stock of KAC. Millican and his wife owned all the stock of SPM. KAC and SPM owned KPOD, and while Sailor Kennedy was the "advisor" to KPOD and KAC, the corporations were not his alter egos. She stated that after she had agreed to the total proposed settlement amount and allocation thereof in the Roberts Action, her attorney informed her Berger Kahns lien was "preventing the distribution of any and all proceeds from the prospective settlement" and Berger Kahn was threatening Roberts and his attorneys and insurance carrier "with legal action if they made any distributions to any plaintiff in the Roberts Action." Millican and Sailor Kennedy submitted substantially similar declarations.
Ruling
The court granted Berger Kahns anti-SLAPP motion. A judgment dismissing the complaint and awarding Berger Kahn attorney fees and costs was entered.
DISCUSSION
1. Anti-SLAPP Law
Section 425.16, subdivision (b)(1), provides, "A cause of action against a person arising from any act of that person in furtherance of the persons right of petition or free speech under the United States or California Constitution in connection with a public issue shall be subject to a special motion to strike, unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim."
In ruling on an anti-SLAPP motion, the trial court engages in a two-step analysis. First, the defendant must show the activity underlying the cause of action is constitutionally protected. (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67 (Equilon).) If so, then the plaintiff must show a likelihood of prevailing on the cause of action. (Ibid.) In meeting that burden, "the plaintiff `must demonstrate that the complaint is both legally sufficient and supported by a sufficient prima facie showing of facts to sustain a favorable judgment if the evidence submitted by the plaintiff is credited. [Citations.]" (Wilson v. Parker, Covert & Chidester (2002) 28 Cal.4th 811, 821.)
"Only a cause of action that satisfies both prongs of the anti-SLAPP statute—i.e., that arises from protected speech or petitioning and lacks even minimal merit—is a SLAPP, subject to being stricken under the statute." (Navellier v. Sletten (2002) 29 Cal.4th 82, 89.) On appeal, we examine both questions de novo, "conducting an independent review of the entire record. [Citations.]" (HMS Capital, Inc. v. Lawyers Title Co. (2004) 118 Cal.App.4th 204, 212, see also Siam v. Kizilbash (2005) 130 Cal.App.4th 1563, 1569.)
2. "Arising Out of" Prong
The Appellants contend their complaint is not subject to an anti-SLAPP motion because it does not arise out of protected activity by Berger Kahn. We disagree.
An anti-SLAPP motion may be brought as to any cause of action arising from the defendants acts in furtherance of: (1) its right of petition; or (2) constitutionally protected free speech in connection with a public issue. (§ 425.16, subd. (b)(1).) Section 425.16, subdivision (e), states protected acts include: (1) statements "made before a[n] . . . executive, or judicial proceeding, or any other official proceeding authorized by law"; (2) statements "made in connection with an issue under consideration or review by a[n] . . . executive, or judicial body, or any other official proceeding authorized by law"; (3) statements made in a public place or public forum "in connection with an issue of public interest"; and (4) "any other conduct in furtherance of the exercise of the constitutional right of petition or the constitutional right of free speech in connection with a public issue or an issue of public interest."
The Appellants complaint plainly arises from Berger Kahns exercise of its right to petition. The gravamen of the complaint is that Berger Kahn filed a notice of lien in the pending Roberts Action, and then withheld its consent to a proposed settlement causing the settlement to fall apart. The Appellants argue they are not suggesting filing the notice of lien was improper, indeed they concede it was an appropriate and statutorily authorized action for Berger Kahn to take. Rather, they contend the tortious conduct was Berger Kahns refusal to consent to the proposed settlement; its assertions made to the Appellants attorney and the Roberts Action defendants attorney that the law precluded distribution of settlement proceeds (even to nonjudgment debtor plaintiffs) without its consent (unless its full lien was satisfied); and its threat to take legal action against the Roberts Action defendants and their attorneys if settlement proceeds were distributed without its consent. The Appellants contend none of the above acts constituted a valid exercise of Berger Kahns petition rights and, thus, are not within the ambit of an anti-SLAPP motion.
The Appellants arguments are nothing more than "spin." No matter what angle you look at this case from, all the acts forming the basis of the Appellants claim are indisputably petitioning activity.
The Enforcement of Judgments Law (§ 680.010 et seq.) specifically authorizes a judgment creditor to obtain a lien in a pending action by filing a notice of lien along with an abstract of judgment or certified copy of the judgment. (§ 708.410, subds. (a), (b).) "One purpose of the lien is to establish and preserve the judgment creditors priority to the money and property the judgment debtor may receive from the pending action. [Citation.] This legislative purpose is best served if a lien obtained under [section 708.410 et seq.] is an effective remedy for judgment creditors. To provide an effective remedy, . . . [section 708.410 et seq.] must be implemented to prevent the judgment debtor, with or without the active assistance of other parties to the settlement agreement, from structuring a settlement so it receives benefits while evading the lien of the judgment creditor, absent appropriate equitable considerations." (Oldham v. California Capital Fund, Inc. (2003) 109 Cal.App.4th 421, 430 (Oldham).)
To this end, section 708.440, subdivision (a), provides "unless the judgment creditors money judgment is first satisfied or the lien is released, the judgment recovered in the action . . . in favor of the judgment debtor may not be enforced by a writ or otherwise, and no compromise, dismissal, settlement, or satisfaction of the pending action . . . or the judgment procured therein may be entered into by or on behalf of the judgment debtor, without the written consent of the judgment creditor or authorization by order of the court obtained under subdivision (b)." (Italics added.) Absent consent from the judgment creditor, the court in which the action is pending has discretion to approve a settlement upon a noticed motion by the judgment debtor. (§ 708.440, subd. (b).) An obvious reason for requiring the judgment creditors consent to or court approval of a proposed settlement is to "prevent certain types of collusion that result in harm to the judgment creditors interest[,]" e.g., to guard against settlements which are structured in such a way as to evade the judgment creditors lien. (Oldham, supra, 109 Cal.App.4th at p. 431.)
The Appellants cite absolutely no authority supporting their assertion Berger Kahn was legally required to consent to the proposed settlement of the Roberts Action. Even were there law supporting such a proposition, Berger Kahns refusal to consent would still arise out of protected petitioning activity. The Appellants emphasis in their brief on whether withholding consent was legally proper is completely irrelevant to the "arising out of" analysis. In Yu v. Signet Bank/Virginia (2002) 103 Cal.App.4th 298, 317, the court noted the lawfulness of a defendants petitioning activity has no bearing on whether the action arises from a constitutional right; thus it is not an issue usually considered in the `arising out of prong," but may be relevant in the second "probability of prevailing" prong of the anti-SLAPP analysis.
Furthermore, the Enforcement of Judgments Law provides a specific means for settling actions in the face of a lien-holding judgment creditor who will not consent—the settling parties may seek the courts prior approval of the settlement upon a noticed motion served on the judgment creditor. (§ 708.440, subd. (b).) It is then within the courts discretion to determine if the interests of the judgment creditor are protected and "whether the settlement is fair and reasonable. [Citation.]" (Oldham, supra, 109 Cal.App.4th at p. 431.) No such motion was filed in the Roberts Action. Instead, in the face of Berger Kahns unwillingness to approve the proposed settlement, the Roberts Action defendants abandoned settlement negotiations.
Berger Kahn validly filed a notice of judgment lien giving it a lien on any interest of Sailor Kennedy and Kennecorp in the Roberts Action. There was nothing improper about Berger Kahns refusal to bless the proposed allocation of the settlement amount between the judgment debtors (Sailor Kennedys partnership, M&B, and Kennecorp), and the nonjudgment debtor plaintiffs in the Roberts Action (i.e., the Appellants). Indeed, it is not at all surprising that Berger Kahn would balk at the proposed allocation given the huge disparity in the amounts allocated to Kennecorp and M&B, and the Appellants. The proposed allocation would make available only $18,651 of the total settlement amount of $501,000 to be applied to Berger Kahns $355,000 lien. And, Berger Kahn was well aware of the fact the Appellants who were to receive virtually all the settlement money, had in the underlying PBA Action been declared to be Sailor Kennedys alter egos and part of a single enterprise which Sailor Kennedy dominated and controlled. That the proposed settlement allocation was the subject of a referees proposed order does not alter out conclusions. The referees proposed order was never adopted by the Roberts Action trial court, nor made an order of the court. There was no noticed motion for court approval of the proposed settlement. Filing the notice of lien and withholding its consent to the proposed settlement were all part of Berger Kahns petition rights.
That Berger Kahns acts arise out of its petition rights is underscored by the fact its acts were absolutely privileged under Civil Code section 47, subdivision (b). Activity that is absolutely privileged under the litigation privilege is also protected under section 425.16. (See Wang v. Hartunian (2003) 111 Cal.App.4th 744, 748; see also Equilon, supra, 29 Cal.4th at pp. 64-65.)
"The general principles governing the application of the litigation privilege are familiar. The privilege applies to any publication or other communication required or permitted by law in the course of a judicial or quasi-judicial proceeding to achieve the objects of the litigation, whether or not the publication is made in the courtroom or in court pleadings, and whether or not any function of the court or its officers is involved. [Citation.]" (Rothman v. Jackson (1996) 49 Cal.App.4th 1134, 1140.) "The privilege is generally described as applying to `any communication (1) made in judicial or quasi-judicial proceedings; (2) by litigants or other participants authorized by law; (3) to achieve the objects of the litigation; and (4) that have some connection or logical relation to the action. [Citation.]" (Id. at p. 1141.)
Filing the statutorily authorized notice of lien in the Roberts Action was absolutely privileged. (See Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1063 [litigation privilege extends to postjudgment enforcement activities].) So too was withholding consent to the settlement, an act necessarily envisioned by the statute. The Appellants argument that by withholding consent, Berger Kahn was improperly trying to lien the Appellants interest in the Roberts Action is nonsense. Berger Kahn has never asserted its lien attached to anything other than Sailor Kennedys and Kennecorps interests in the Roberts Action. Withholding consent to the allocation was nothing more than a valid exercise of Berger Kahns right to question whether the proposed settlement in good faith reflected Sailor Kennedys and Kennecorps true financial interest in the proposed settlement amount, or was in fact structured so as to evade Berger Kahns judgment lien. (Oldham, supra, 109 Cal.App.4th at p. 431.)
3. Probability of Prevailing
The Appellants contend they demonstrated a probability of prevailing in their action against Berger Kahn. They have not.
"Once we determine that the anti-SLAPP statute applies, the burden then shifts to the plaintiff to demonstrate a probability of prevailing. [Citation.] If the plaintiff does so, the motion to strike under the anti-SLAPP statute must be denied. To establish the requisite probability of prevailing, the plaintiff must state and substantiate a legally sufficient claim. [Citation.] `Put another way, the plaintiff "must demonstrate that the complaint is both legally sufficient and supported by a sufficient prima facie showing of facts to sustain a favorable judgment if the evidence submitted by the plaintiff is credited." [Citation.]" (Navarro v. IHOP Properties, Inc. (2005) 134 Cal.App.4th 834, 843.)
The Appellants original complaint contained causes of action for intentional and negligent interference with prospective economic advantage. In their appellate brief, they do not discuss either cause of action. They do not mention any of the elements of those causes of action or endeavor in any way to demonstrate they produced sufficient evidence of facts that would support a judgment in their favor on either cause of action. Accordingly, they have waived any argument they demonstrated a probability of prevailing on those causes of action. (Guthrey v. State of California (1998) 63 Cal.App.4th 1108, 1115-1116 (Guthrey); Kim v. Sumitomo Bank (1993) 17 Cal.App.4th 974, 979 (Kim).)
The Appellants do argue they demonstrated a probability of prevailing on their abuse of process cause of action. They also mention in passing their emotional distress causes of action, but engage in absolutely no analysis of them. (See Guthrey, supra, 63 Cal.App.4th at pp. 1115-1116 [waiver]; Kim, supra, 17 Cal.App.4th at p. 979 [waiver].) These causes of action were alleged in the Appellants first amended complaint, which was improperly filed after Berger Kahns anti-SLAPP motion was filed. (See ARP Pharmacy Services, Inc. v. Gallagher Bassett Services, Inc. (2006) 138 Cal.App.4th 1307, 1323 [plaintiff cannot amend pleading to avoid pending anti-SLAPP motion]; see also Sylmar Air Conditioning v. Pueblo Contracting Services, Inc. (2004) 122 Cal.App.4th 1049, 1054-1055 [no express or implied right to amend pleading to avoid anti-SLAPP motion]; Navellier v. Sletten (2003) 106 Cal.App.4th 763, 772 (Navellier) [plaintiff cannot use "eleventh-hour amendment" to plead around anti-SLAPP motion].) Accordingly, they need not be considered. Furthermore, all the tort causes of action alleged in the original and the first amended complaint are barred by the litigation privilege of Civil Code section 47, subdivision (b), and thus the Appellants have no probability of prevailing on any of their causes of action. (See Silberg v. Anderson (1990) 50 Cal.3d 205, 212, 215 [litigation privilege immunizes from liability for all torts, other than malicious prosecution]; see also Navellier, supra, 106 Cal.App.4th at p. 770.)
DISPOSITION
The judgment is affirmed. The Respondent shall recover its costs on appeal.
We concur:
MOORE, J.
ARONSON, J. --------------- Notes: All further statutory references are to the Code of Civil Procedure, unless otherwise indicated.