Opinion
NOT TO BE PUBLISHED
Superior Court County of Ventura, Super. Ct. No. CIV 239780, Kenneth W. Riley, Judge
Lawrence I. Schwartz; for Appellants.
Robert A. Bartosh; Hathaway, Perrett, Webster, Powers, Chrisman & Gutierrez, for Respondent.
YEGAN, Acting P.J.
Appellants Mark Thomas Torrez and Cheryl A. Brogdin appeal from an order striking their cross-complaint under the anti-SLAPP statute. (Code Civ. Proc., § 425.16, subd. (i).) The trial court found that the cross-complaint, to enforce a proposed settlement agreement, was a SLAPP suit and that appellants were not likely to prevail on the cross-complaint at trial. (§ 425.16, subd. (b).) We affirm. (Navellier v. Sletten (2002) 29 Cal.4th 82, 90.)
Unless otherwise stated, all statutory references are to the Code of Civil Procedure.
Facts and Procedural History
Respondent Alfredo Torres is the Executor of the Estate of David Benetez Torrez. On March 16, 2006, respondent sued appellants for fraud, elder financial abuse, and constructive trust based on the alleged mismanagement of decedent's finances and real property.
Counsel discussed a proposed settlement but appellants refused to sign the settlement agreement or put the settlement on the record at a mandatory settlement conference. The court's January 30, 2007 minute order stated "not settled."
Appellants claimed their former attorney negotiated a different settlement and filed a motion to enforce their version of the purported settlement agreement. (§ 664.6.)
The trial court denied the motion because the alleged settlement agreement was not reduced to a writing and signed by the parties. (See Levy v. Superior Court (1995) 10 Cal.4th 578, 584 [out-of-court settlement agreement must be signed by parties].) The court, in an April 19, 2007 minute order, found: "Evidence Code section 1152 protects an offer of settlement . . . . The nature of settlement conferences is that parties are allowed to make offers and counter offers. Settlements are enforced only after they are agreed to by both parties and the same is put on the Court[']s record." The order provided that appellants may "file a cross complaint as long as it does not violate this order and the prohibition of Evidence Code section 1152."
Unhappy with the order, appellants filed a motion for reconsideration and clarification. Denying the motion, the trial court stated: "Counsel, I don't know why you're here. I thought my minute order was pretty clear."
Appellants asked if they could file a supplemental answer. The trial court responded: "[T]he Minute Order said you could. . . . But my restriction to you, my prohibition to you was that it's not to contain anything that went on in settlement discussions."
Appellants filed a supplemental answer and a cross-complaint. The cross-complaint referenced a proposed settlement letter and alleged that respondent "breached the settlement agreement by presenting settlement documents which contained terms that were materially different than those agreed upon by the parties . . . ."
In like fashion, the supplemental answer alleged, as a ninth affirmative defense, that respondent breached "a written settlement agreement" and "[t]he court should enforce the settlement agreement." On July 24, 2007, the trial court struck the ninth affirmative defense without leave to amend.
Respondent filed a special motion to strike the cross-complaint under the anti-SLAPP statute. The trial court granted the motion and ordered appellants and counsel to pay $2,915 sanctions.
Cross-Complaint
We review the section 425.16 order de novo to determine whether the action arises from a protected speech or petitioning activity, and if so, whether appellants have established a probability of prevailing on the cross-complaint. (A.F. Brown Electrical Contractor, Inc. v. Rhino Electric Supply, Inc. (2006) 137 Cal.App.4th 1118, 1124-1125.)
The anti-SLAPP statute provides that "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" is an act in furtherance of the person's right of petition or free speech. (§ 425.16, subd. (e)(2).) Our courts have adopted an expansive view of litigation-related conduct to which section 425.16 applies. (Kashian v. Harriman (2002) 98 Cal.App.4th 892, 908.)
The trial court found that appellants are suing "for breach of a (non-existent agreement)" and that respondent's "letter and subsequent refusal to abide by the 'agreement' can be considered to be within the definition of 'act in furtherance of a person's right of petition or free speech."
Appellants concede the first prong of section 425.16 is satisfied, as they must, because the action is analogous to Navellier v. Sletten, supra, 29 Cal.4th 82. There, a management company sued a trustee in federal court and resolved the action with a settlement agreement that included a release from the trustee. After the trustee filed counterclaims in federal court challenging the validity of the release, the management company commenced an action is state court alleging that that the trustee had committed fraud and misrepresented the scope of the release. (Id., at p. 87.) Our Supreme Court held that the state action "falls squarely within the plain language of the anti-SLAPP statute." (Id., at p. 90.)
Second Prong: Probability of Prevailing
The trial court found that the second prong of anti-SLAPP statute was met because it had "already ruled that the exchange of [proposed settlement] letters is not enforceable." It did not err because the cross-complaint is barred by the litigation privilege. (Civ. Code, § 47, subd. (b).) There is an absolute privilege, which "applies to any publication required or permitted by law in the course of a judicial proceeding to achieve the objects of the litigation, even though the publication is made outside the courtroom and no function of the court or its officers is involved. [Citations.]' [Citation.]" (Moore v. Conliffe (1994) 7 Cal.4th 634, 641.) The privilege applies where the communication bears a "functional connection" to the litigation. (Rothman v. Jackson (1996) 49 Cal.App.4th 1134, 1146.) "That is to say, the communicative act – be it a document filed with the court, a letter between counsel or an oral statement – must function as a necessary or useful step in the litigation process and must serve its purposes." (Ibid.)
Appellants presented no evidence that they are likely to prevail on the cross-complaint. (See Tuchscher Development Enterprises, Inc. v. San Diego Unified Port Dist. (2003) 106 Cal.App.4th 1219, 1235-1238 [only competent and admissible evidence may be considered].) Settlement discussions, whether written or oral, are inadmissible (Evid. Code, § 1152, subd. (a)) except in actions for breach of a covenant of good faith and fair dealing or violations of the Insurance Code. (See White v. Western Title Ins. Co., (1985) 40 Cal.3d 870, 887.)
The cases cited by appellant involve insurance bad faith actions (Shade Foods, Inc. v. Innovative Product Sales & Marketing, Inc. (2000) 78 Cal.App.4th 847, 915), a letter of apology to establish the truth or falsity of statements in a newsletter (Carney v. Santa Cruz Women Against Rape (1990) 221 Cal.App.3d 1009, 1023-1024), and a letter from a third party acknowledging a debt (Truestone, Inc. v. Simi West Industrial Park II (1984) 163 Cal.App.3d 715, 726). Each case represents an exception to the general rule that settlement offers are not admissible to prove a party's liability for a loss or damage claimed by an adverse party. (See Evid. Code, § 1152, subds. (b) & (c); 2 Jefferson, Cal. Evidence Benchbook (Cont'd. Ed. Bar, 3d ed. 2007) §§ 34.15-34.17, pp. 791-792.)
Appellants were warned that the settlement discussions were privileged and could not be the basis for a cross-complaint. The trial court stated: "If a court were to allow the offers and counter offers in Mandatory Settlement Conferences to become contracts, the entire Mandatory Settlement Conference process would be undermined and Evidence Code section 1152 would be meaningless."
The same principle applies to out-of-court settlement discussions. If the law were otherwise, appellants could file a new cross-complaint each time a settlement offer was discussed. In Sully-Miller Contracting Co. v. Gledson/Cashman Construction, Inc. (2002) 103 Cal.App.4th 30, 37-38, we held that "settlement of civil actions is the lifeblood of a crowded calendar. Litigants should be encouraged to settle, and courts should seek creative ways to fully and finally resolve matters consistent with the wishes of the parties as they shall agree. But courts cannot force parties to settle when they have not entered a binding agreement to do so. Basic principles of contract law dictate that a party cannot be bound by a promise given without consideration, and that a party who offers to settle may not be held hostage to the whim of the offeree concerning the time and manner of acceptance."
Here the cross-complaint attempts to make a silk pursue out of a sow's ear. Like Navellier v. Sletten, supra, 29 Cal.4th 82, the anti-SLAPP statute bars appellants from filing an action to enforce a proposed settlement agreement that was not finalized.
The order granting the special motion to strike is affirmed. Respondent is awarded costs and reasonable attorney's fees on appeal, in an amount to be determined by the trial court. (§ 425.16, subd. (c).)
We concur: COFFEE, J., PERREN, J.