The judgment debtor strikes back – California Code of Civil Procedure section 425.16.

By: Eric Michael Papp, Esq.

The judgment debtor strikes back – California Code of Civil Procedure section 425.16.

You have your judgment and you are levying accounts and seizing property. So far, so good. Then you get a call from your creditor client, they just got served with a lawsuit and a motion for a preliminary injunction by the debtor.

Are collection efforts by a creditor "protected activities" and subject to a CCP § 425.16 Special Motion to Strike if the debtor pulls a fast one and sues the creditor for any number of different theories (with the real goal of stopping or stalling collection efforts)? Is the debtor’s complaint a Strategic Lawsuit Against Public Participation (a "SLAPP" suit)?

Procedural Traps For the Special Motion to Strike

Except as otherwise provided in CCP § 425.16, the procedures on motions to strike generally should presumably apply to Special Motions to Strike. (Weil & Brown, Cal. Prac. Guide: Civ. Pro. Before Trial, 7:950 (The Rutter Group 2008). The special procedural aspects of CCP § 425.16 to be wary of are: the motion must be filed within sixty (60) days of service of the complaint and the hearing date for the motion must be set within thirty (30) days of service of the motion. (CCP § 425.16 (f)).

Protected Activities of the Creditor

The California Supreme Court in the case of Rusheen v. Cohen (2006) 37 Cal.4th 1048 addressed this issue. In Rusheen, the California Supreme Court opened its opinion as follows:

Are actions taken to collect a judgment, such as obtaining a writ of execution and levying on a judgment debtor's property, protected by the litigation privilege of Civil Code section 47, subdivision (b), as communication[s] in the course of a judicial proceeding? In Brown v. Kennard (2001) 94 Cal.App.4th 40, 113 Cal.Rptr.2d 891 (Brown ), the Court of Appeal held that the privilege protects both the process of applying for the writ of execution and the levy on the judgment debtor's property, as an act of carrying out the writ. (Rusheen, 37 Cal.4th at 1052).

The Court went on to eliminate any conflict between the appellate courts on the subject by holding:

We conclude that where the cause of action is based on a communicative act, the litigation privilege extends to those noncommunicative actions which are necessarily related to that communicative act. (Rusheen, 37 Cal.4th at 1052).

In Rusheen, the plaintiff filed an abuse of process claim against the opposing attorney (Cohen) based on the communicative act of filing allegedly false declarations of service to obtain a default judgment, the post judgment enforcement efforts, including the application for writ of execution and act of levying on property. The Supreme Court found these acts were protected by the litigation privilege (CC § 47) and reversed the appellate court’s contrary ruling.

The Anti-SLAPP Motion

In evaluating an anti-SLAPP motion, the trial court first determines whether the defendant has made a threshold showing that the challenged cause of action "arises from" protected activity. (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67).

In our scenario, the plaintiff’s complaint and motion for preliminary injunction are nothing more than an attempt to sue the judgment creditor to stop, hinder or delay the collection activities. However, this is protected activity on the part of the creditor. (Rusheen, 37 Cal.4th at 1052).

In this regard, the anti-SLAPP statute applies to causes of action "arising from any act...in furtherance of (a) person’s right of petition or free speech under the United States or California Constitution in connection with a public issue. (CCP § 425.16(b)(1)). The cause of action may appear in either a complaint, petition or cross-complaint. (CCP § 425.16(h); see Kajima Eng. & Const., Inc. v. City of Los Angeles (2002) 95 Cal. App. 4^th 921, 929). The theory or type of plaintiff’s action (i.e. contract or tort) is not dispositive: "Nothing in the statute...excludes any particular type of action from its operation." (Navellier v. Sletten (2002) 29 Cal. 4^th 82, 92). "Conduct alleged to constitute breach of contract may also come within constitutionally protected speech or petitioning." (Navellier, 29 Cal. 4^th at 92; Midland Pac. Bldg. Corp. v. King (2007) 157 Cal. App. 4^th 264, 273-274).

The anti-SLAPP statute uses the term "cause of action" interchangeably with "claim," "complaint" and "action." (See Thomas v. Quintero (2005) 126 Cal. App 4^th 635, 646). As pertains here, complaints as well as petitions for injunctive relief are subject to anti-SLAPP motions. (Thomas, 126 Cal. App. 4^th at 651-652; City of Los Angeles v. Animal Defense League (2006) 135 Cal. App. 4^th 606, 617).

Here, A cause of action arising from defendant’s litigation activity may appropriately be the subject of a section 425.16 motion to strike. (Church of Scientology v. Wollersheim (1996) 42 Cal.App.4th 628, 648, disapproved on other grounds in Equilon Enterprises v. Consumer Cause, Inc., (2002) 29 Cal.4th 53, 68, fn. 5). Any act includes communicative conduct such as the filing, funding, and prosecution of a civil action. (Ludwig v. Superior Court (1995) 37 Cal.App.4th 8, 17 19).

Clearly, a creditor’s attempts to pursue collection of a lawfully obtained judgment are privileged. (Rusheen, 37 Cal.4th at 1052). A debtor’s misguided attempt at suing the creditor to stop collection activity is exactly what the anti-SLAPP statute was meant to address. Moreover, because a debtor attempts to cover his tracts by alleging Breach of Contract, Fraud or even a claim for Accounting is of no purpose as the theory or type of plaintiff’s action (i.e. contract or tort) is not dispositive: "Nothing in the statute...excludes any particular type of action from its operation." (Navellier v. Sletten (2002) 29 Cal. 4^th 82, 92). Moreover, a debtor’s desire to further cloud the waters by filing a motion for a preliminary injunction is also misguided as petitions for injunctive relief are also subject to anti-SLAPP motions. (Thomas v. Quintero (2005) 126 Cal. App. 4^th 635, 651-652; City of Los Angeles v. Animal Defense League (2006) 135 Cal. App. 4^th 606, 617).

In our scenario, the creditor has made a threshold showing that the challenged cause of action as alleged "arises from" protected activity (i.e. the creditor attempting to collect on his judgment). (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67). This now takes us to the second part of the analysis; the "probability of prevailing on the merits" prong.

As to this second prong, the California Supreme Court in Rusheen stated the following:

If the court finds the defendant has made the threshold showing, it determines then whether the plaintiff has demonstrated a probability of prevailing on the claim. (Equilon Enterprises v. Consumer Cause, Inc., supra, 29 Cal.4th at p. 67). In order to establish a probability of prevailing on the claim (Code Civ. Proc., § 425.16, subd. (b)(1)), a plaintiff responding to an anti-SLAPP motion must state [ ] and substantiate[ ] a legally sufficient claim. [Citations ] 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. [Citations.] (Wilson v. Parker, Covert & Chidester (2002) 28 Cal.4th 811, 821). (Rusheen, 37 Cal. 4^th at 1056).

Here, a creditor’s attempts to collect on a judgment are squarely covered by the litigation privilege. (CC § 47). As set forth by the California Supreme Court in Rusheen,

Although originally enacted with reference to defamation [citation], the privilege is now held applicable to any communication, whether or not it amounts to a publication [citations], and all torts except malicious prosecution. [Citations.] Further, it 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.] [ ] The usual formulation is that the privilege applies 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. [Citations.] (Silberg v. Anderson (1990) 50 Cal.3d 205, 212) Thus, communications with some relation to judicial proceedings are absolutely immune from tort liability by the litigation privilege (Rubin v. Green (1993) 4 Cal.4th 1187, 1193). It is not limited to statements made during a trial or other proceedings, but may extend to steps taken prior thereto, or afterwards. (5 Witkin, Summary of Cal. Law, supra, Torts, §§ 470, 505, pp. 554, 591). (Rusheen, 37 Cal. 4^th at 1057).

As such, a creditor’s collection activities, regardless of how mischaracterized they may be by the debtor are absolutely privileged under CC § 47 and cannot form the basis for any cause of action or for a motion for preliminary injunction. On this basis alone, the debtor’s complaint and motion for Preliminary Injunction should be dismissed pursuant to CCP § 425.16.

Fraud and/or Punitive Damages Claimed by the Debtor

In addition to the above, the debtor must present sufficient evidence to satisfy his burden of proof under the applicable substantive law. With respect to a claim of fraud or a request for punitive damages, the debtor must establish by "clear and convincing evidence" that is evidence "sufficient to command the unhesitating assent of every reasonable mind," rather than a mere preponderance that the creditor was "guilty of oppression, fraud or malice." (See Christian Research Institute v. Alnor (2007) 148 Cal. App. 4^th 71, 84).

Moreover, where punitive damages are sought, the debtor must again meet this burden by producing "clear and convincing evidence" to support his claim and his ability to prove up conduct warranting punitive damages. (Conroy v. Spitzer (1999) 70 Cal. App. 4^th 1446, 1451-1454; Rosenaur v. Scherer (2001) 88 Cal. App. 4^th 260, 273). Again, if the debtor has not done so, his fraud cause of action and/or a claim for punitive damages should be dismissed under CCP § 425.16.

Amendment of the complaint?

It is settled law that "On review of an anti-SLAPP motion to strike however, the standard is akin to that for summary judgment or judgment on the pleadings. We must take the complaint as it is." (Premier Medical Management Systems, Inc. v. California Ins. Guarantee Assn. (2006) 136 Cal.App.4th 464, 476). As such, the complaint says what is says, whether it could be amended to state a valid cause of action is immaterial. (See also, Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal. 4^th 260, 291). Therefore, the court should deny any requests by the debtor to amend his pleading.

Conclusion

In these desperate times, you can expect debtors to take desperate measures to hinder and dely a creditor’s attempts to collect on a judgment. This might even include suing the creditor for any of a number of theories along with a motion for a preliminary injunction.

The California Supreme Court in Rusheen held that actions to enforce a judgment are protected activities subject to the litigation privilege of CC § 47. As such, because the debtor’s complaint and motion for preliminary injunction "Arise out of" such protected activity, they are subject to a CCP § 425.16 Special Motion to Strike. Therefore, the court should grant a creditor’s Special Motion to Strike and dismiss the debtor’s complaint as well as a motion for preliminary injunction.

Eric Papp is a licensed attorney in both California and Nevada and a licensed Real Estate Broker. Mr. Papp is the principal of the Law Offices of Eric Michael Papp located at 495 East Rincon, Suite 125, Corona, CA 92879. www.ca-nvlaw.com Mr. Papp can be reached at (951) 279-6700

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