Judge: Frank M. Tavelman, Case: 21STC12868, Date: 2023-05-19 Tentative Ruling

Case Number: 21STC12868    Hearing Date: May 19, 2023    Dept: A

LOS ANGELES SUPERIOR COURT

NORTH CENTRAL DISTRICT - BURBANK

DEPARTMENT A

SPECIAL MOTIONS TO STRIKE

ALLEGATIONS: 

On April 5, 2021 Adi Halo (“Plaintiff” or “Halo”) filed suit against Salvatore Scuderi (“Scuderi”) and John Sullivan (“Sullivan”) (collectively “Defendants”). Plaintiff asserts a single cause of action for wrongful use of civil proceedings. Plaintiff claims that Scuderi and his attorney Sullivan filed a baseless civil lawsuit in February of 2019. Plaintiff further claims that Scuderi and Sullivan filed this prior suit intending to prevent Plaintiff from collecting upon a small claims court judgment. Scuderi and Sullivan both move to strike the complaint as a Strategic Lawsuit Against Public Participation (“SLAPP”).

HISTORY: 

On June 6, 2021, Sullivan filed his special motion to strike, and Scuderi filed his special motion to strike on June 17, 2021. On July 16, 2021, Plaintiff filed a joint opposition. Sullivan filed his reply on August 2, 2021, and on August 3, 2021 Scuderi filed his reply. The case was transferred to this Court on December 19, 2022, after being transferred multiple times to other courts without a ruling on the motion.

On March 24, 2023 the Court heard arguments from both parties. On April 11, 2023, the Court issued a ruling continuing the motion and granting Scuderi leave to amend his declaration as it pertained to his affirmative defense of advice-of-counsel.

On May 1, 2023, Scuderi filed his supplemental declaration. On May 2, 2023, Halo filed further briefing. On May 10, 2023, Scuderi filed a reply to Halo’s further briefing.

The motions are now scheduled for hearing on May 19, 2023.

JUDICIAL NOTICE:

Sullivan requests the Court take judicial notice of Exhibits 3, 6, 7, 8, 9, 10, 11 and 12 attached to his declaration. Sullivan requests judicial notice as these exhibits are copies of court records.

Judicial notice can be taken of court records under C.C.P. § 451(a). The Court grants Sullivan’s request for judicial notice.

EVIDENTIARY OBJECTIONS:

Scuderi objects to Plaintiff’s opposition page 9, line 26 to page 10, line 15. This section directly quotes from a Securities and Exchange Commission (“SEC”) case against Scuderi, which is attached in full as Plaintiff’s Exhibit 1. Scuderi objects on the grounds that the SEC proceeding bears no relevance as to this motion. The Court agrees, Scuderi’s objection is SUSTAINED.

Sullivan objects to Plaintiff’s opposition page 1, line 28 to page 2, line 4 and Exhibit 12, which reference Sullivan’s bar records from the state of Connecticut. Sullivan objects on the grounds that Plaintiff impermissibly seeks to use evidence of prior wrongs which have no bearing on this action. The Court agrees that the evidence is barred under Evidence Code §§ 1101 and 1104, Sullivan’s objection is SUSTAINED.

ANALYSIS:

I.                LEGAL STANDARD 

“An anti-SLAPP motion ‘requires the court to engage in a two-step process. First, the court decides whether the defendant has made a threshold showing that the challenged cause of action is one arising from protected activity…If the court finds that such a showing has been made, it then determines whether the plaintiff has demonstrated a probability of prevailing on the claim.’ ‘Under section 425.16, subdivision (b)(2), the trial court in making these determinations considers ‘the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based.’” (Premier Medical Management Systems, Inc. v. California Insurance Guarantee Association (2006) 136 Cal.App.4th 464, 472 (Citations Omitted).)

“Resolution of an anti-SLAPP motion involves two steps. First, the defendant must establish that the challenged claim arises from activity protected by section 425.16. [Citation.] If the defendant makes the required showing, the burden shifts to the plaintiff to demonstrate the merit of the claim by establishing a probability of success. We have described this second step as a ‘summary-judgment-like procedure.’[Citation.] The court does not weigh evidence or resolve conflicting factual claims. Its inquiry is limited to whether the plaintiff has stated a legally sufficient claim and made a prima facie factual showing sufficient to sustain a favorable judgment. It accepts the plaintiff's evidence as true, and evaluates the defendant's showing only to determine if it defeats the plaintiff's claim as a matter of law.” (Baral v. Schnitt (2016) 1 Cal.5th 375, 384-85 (Baral).)   As to the second step inquiry, a plaintiff seeking to demonstrate the merit of the claim “may not rely solely on its complaint, even if verified; instead, its proof must be made upon competent admissible evidence.” (Sweetwater Union High School Dist. v. Gilbane Building Co. (2019) 6 Cal.5th 931 (Sweetwater).)

II.              MERITS

Arising from Protected Activity

“A cause of action is subject to a special motion to strike if the defendant shows that the cause of action arises from an act in furtherance of the defendant’s constitutional right of petition or free speech in connection with a public issue and the plaintiff fails to demonstrate a probability of prevailing on the claim.”  (Digerati Holdings, LLC v. Young Money Entertainment, LLC (2011) 194 Cal.App.4th 873, 883 (Citations Omitted).)

“An ‘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’ is defined by statute to include ‘(1) any written or oral statement or writing made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law, (2) 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, (3) any written or oral statement or writing made in a place open to the public or a public forum in connection with an issue of public interest, or (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.’  If the defendant shows that the cause of action arises from a statement described in clause (1) or (2) of section 425.16, subdivision (e), the defendant is not required to separately demonstrate that the statement was made in connection with a ‘public issue.’”  (Id. (Citations Omitted).)

“A cause of action is one ‘arising from’ protected activity within the meaning of section 425.16, subdivision (b)(1) only if the defendant's act on which the cause of action is based was an act in furtherance of the defendant's constitutional right of petition or free speech in connection with a public issue. In deciding whether the ‘arising from’ requirement is satisfied, ‘the court shall consider the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based.’ Whether the ‘arising from’ requirement is satisfied depends on the ‘gravamen or principal thrust’ of the claim. A cause of action does not arise from protected activity for purposes of the anti-SLAPP statute if the protected activity is merely incidental to the cause of action.”  (Id. at 883-884 (Citations Omitted).)

Scuderi and Sullivan filed their limited civil jurisdiction lawsuit on February 4, 2019. (Sullivan Decl. ¶ 40, Halo Decl. Exh. 22.) The claim in the suit was for intentional interference with contractual relations and named Halo as defendant. (Id.) Scuderi and Sullivan filing a lawsuit is clearly in furtherance of their right of petition, and as such a protected activity for the purposes of an anti-SLAPP motion. Therefore, the burden shifts to Halo to show a probability of prevailing on her claim.

Probability of Prevailing

“To prevail on a malicious prosecution claim, the plaintiff must show that the prior action (1) was commenced by or at the direction of the defendant and was pursued to a legal termination favorable to the plaintiff; (2) was brought without probable cause; and (3) was initiated with malice.”  (Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 292.)

First Element

As to the first element of the claim, Plaintiff has clearly shown that the action was commenced by the named defendants Scuderi and Sullivan. All parties agree that the February 2019 lawsuit was voluntarily dismissed. (Complaint ¶ 9-14., Sullivan Decl. ¶ 43, Scuderi Decl. ¶ 9.) A voluntary dismissal is presumed to be a favorable termination of a malicious prosecution claim on the merits. (Lee v. Kim (2019) 41 Cal.App.5th 705.) Scuderi argues that the test for whether voluntary dismissal is a termination favorable to plaintiff is whether it tends to indicate plaintiff’s innocence, rather than technical or procedural considerations. (Cantu v. Resolution Trust Corp. (1992) 4 Cal.App.4th 857, 881.) Plaintiff responds that case law indicates a voluntary dismissal may be an implicit concession that the dismissing party cannot maintain the action and constitute a decision on the merits. (JSJ Limited Partnership v. Mehrban (2012) 205 Cal.App.4th 1512, 1524.)

The Court notes that neither Scuderi nor Sullivan provide a rationale for the dismissal. Sullivan states that after limited attempts to settle the case he dismissed it without prejudice. (Sullivan Decl. ¶ 43.) Scuderi and Sullivan have not provided alternative explanation for the dismissal other than the presumed innocence of Halo. As such, the Court finds that the voluntary dismissal can serve as a termination in favor of the plaintiff in this instance.

The Court is satisfied that Halo has shown the probability of prevailing on the first element of her claim.

Second Element

“The question of probable cause is ‘whether, as an objective matter, the prior action was legally tenable or not.’ ‘A litigant will lack probable cause for his action either if he relies upon facts which he has no reasonable cause to believe to be true, or if he seeks recovery upon a legal theory which is untenable under the facts known to him.’ ‘In a situation of complete absence of supporting evidence, it cannot be adjudged reasonable to prosecute a claim.’ Probable cause, moreover, must exist for every cause of action advanced in the underlying action. ‘[A]n action for malicious prosecution lies when but one of alternate theories of recovery is maliciously asserted…’”  (Id. (Citations Omitted).)

“To prevail on a cause of action for intentional interference with contractual relations, a plaintiff must plead and prove (1) the existence of a valid contract between the plaintiff and a third party; (2) the defendant's knowledge of that contract; (3) the defendant's intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage.” (Reeves v. Hanlon (2004) 33 Cal.4th 1140.)

Plaintiff first argues that there has been no proof of a contract on which Scuderi and Sullivan could have relied in making their claim. The underlying loan agreement which Scuderi and Sullivan argues interference with is a $25,000 loan made by Scuderi to Stagecrafts, LLC (“Stagecrafts”) in September of 2016. (Sullivan Decl. ¶ 3-5, Scuderi Decl. ¶ 2.) On March 16, 2018 Halo obtained a small claims court judgment against Stagecrafts in the amount of $7,500. (Halo Decl. Exh. 42, Sullivan Decl. ¶ 9-10.), although the Defendants assert the claim was reduced to $5,000.  On July 6, 2018 Scuderi and Stagecrafts memorialized their 2016 agreement in writing and filed a UCC-1 statement based on the security agreement. (Sullivan Decl. 12-15.)  A signed copy of this contract is attached to Sullivan’s declaration. (Sullivan Decl. Exhs. 1 & 4.)

Plaintiff attempts to negate the existence of the contract first by pointing to Scuderi’s obligations to the SEC. The Court fails to find any potential obligation to the SEC speaks to the existence of a contract between Scuderi and Stagecrafts. Halo then argues that the only evidence of a contract is a redacted Bank of American loan statement listing Ruth J. Scuderi and Salvatore Scuderi. (Oppo. pgs. 10-11.) The Court finds this statement to be inaccurate considering the written loan agreement between Scuderi and Stagecrafts attached to Sullivan’s declaration. The Court does not find that Plaintiff has shown Scuderi and Sullivan lacked probable cause to believe a contract existed on which to base their lawsuit.

Plaintiff also argues that no agreement exists by virtue of the contract not involving a third party. A cause of action for intentional interference with a contract requires a valid contract between plaintiff and a third party. (Pacific Gas & Electric Co. v. Bear Stearns & Co. (1990) 50 Cal.3d 1118.) Halo argues no third-party involvement because Scuderi is an organizer of Stagecrafts.

As evidence of Scuderi’s organizer status Halo attaches a commercial lease for Stagecrafts from 2017 which lists Scuderi. (Halo Decl. Exh. 8.) Halo does not offer an explanation as to how Scuderi’s presence on the lease agreement renders him an organizer of Stagecrafts. Halo does not explain how Scuderi’s presence in the lease agreement negates the presence of a third party in a loan which commenced a year before the lease was signed. Scuderi’s declaration claims that he was never a managing member, officer, or director of Stagecrafts. (Scuderi Decl. ¶ 3.)  The Court does not find that Plaintiff has shown the contract between Scuderi and Stagecrafts did not involve a third party. It is clearly a dispute between parties as to the existence of a third-party contract. Plaintiff has not produced evidence which supports a finding that she would probably succeed in her claim that Scuderi and Sullivan lacked a reasonable basis for the existence of a contract.

Halo offers no argument in her opposition as to whether she knew of the existence of the agreement between Scuderi and Stagecrafts. Conversely, Sullivan offers that Halo did know of the existence of this contract. On August 8, 2018 Halo sued Jenn Scuderi Crafts (“Jenn”). (Sullivan Decl. Exh 8.) Jenn moved to dismiss the lawsuit and Halo filed an opposition. Sullivan argues that Halo knew of the contract because in her opposition Halo calls the agreement between Stagecrafts and Scuderi “phony”. (Sullivan Decl. ¶ 32-33, Exh. 11.) Halo offers no explanation as to her claims made in that opposition. The Court does not find Halo has shown she was unaware of the contract between Stagecrafts and Scuderi.

Halo also argues that Scuderi and Sullivan lacked a basis to believe she acted intentionally to interfere with the contract, and that her action of pursuing her small claims judgment is absolutely privileged. (Oppo. pg. 4.) “The litigation privilege, codified at Civil Code section 47, subdivision (b), provides that a ‘publication or broadcast’ made as part of a ‘judicial proceeding’ is privileged. This privilege is absolute in nature, applying ‘to all publications, irrespective of their maliciousness.” (Silberg v. Anderson (1990) 50 Cal.3d 205, 216.) “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 [has] some connection or logical relation to the action.” (Id. at 212.) “The privilege ‘is not limited to statements made during a trial or other proceedings, but may extend to steps taken prior thereto, or afterwards.’(Citation)” (Action Apartment Association, Inc. v. City of Santa Monica (2007) 41 Cal.4th 1232, 1241.) “[T]he privilege is ‘an “absolute” privilege, and it bars all tort causes of action except a claim of malicious prosecution.’ (Citations)” (Hagberg v. California Federal Bank (2004) 32 Cal.4th 350, 360.)

Halo’s counsel argued at the hearing that Halo’s pursuit of her small claims court judgment is absolutely privileged under Civil Code § 47. It would follow that Scuderi’s claim for intentional interference with contractual relations is legally unsustainable. Case law addressing the absolute litigation privilege and anti-SLAPP primarily focuses on cases where movant is claiming the privilege. For example, in Kenne v. Stennis (2014) 230 Cal.App.4th 953, the Court of Appeal upheld an anti-SLAPP motion to plaintiff’s claim for intentional infliction of emotional distress. The Court of Appeal reasoned that because plaintiff’s false police report served as the basis of the claim, and because the false police report was a communication made in a judicial proceeding, the claim for intentional infliction of emotion distress was a SLAPP. (Kenne v. Stennis supra, 230 Cal.App.4th 953 at 971.

Kenne differs from this case, where the absolute litigation privilege is being invoked to defeat an anti-SLAPP motion. Regardless, the court finds the litigation privilege to be properly invoked. Case law is clear that Civil Code § 47 bars all tort causes of action, outside of malicious prosecution. Civil Code § 47 renders the claim for intentional interference with contractual relations legally untenable under the facts known to Sullivan.

Sullivan argues the privileged action is not protected if it is committed in bad faith as per Richardson v. La Rancherita (1979) 98 Cal.App.3d 73. In her opposition, Halo argues the lack of evidence supporting an allegation of her bad faith. Sullivan does not elaborate on what clear evidence there is of bad faith. The Court finds Sullivan has not provided evidence of bad faith negating the litigation privilege.

Sullivan also argues litigation privilege is a defense which Scuderi and Sullivan do not have to disprove. (Sullivan Mot. pg. 12.) Sullivan does not provide legal authority for this argument. Sullivan argues that Halo must prove privilege. The Court finds that Halo has done so.

Halo has demonstrated Scuderi and Sullivan lacked probable cause for their cause of action for intentional interference with contractual relationship.

Third Element

“‘The ‘malice’ element…relates to the subjective intent or purpose with which the defendant acted in initiating the prior action. The motive of the defendant must have been something other than that of bringing a perceived guilty person to justice or the satisfaction in a civil action of some personal or financial purpose. The plaintiff must plead and prove actual ill will or some improper ulterior motive.’ Malice ‘may range anywhere from open hostility to indifference. Malice may also be inferred from the facts establishing lack of probable cause.’”  (Id. (Citations Omitted).)

Halo’s counsel argues Scuderi and Sullivan’s intent in filing their claim was to prevent Halo from collecting on a judgment she was legally entitled to. Halo’s counsel stressed at the hearing the importance of the timeline in establishing this intent. The relevant chronology is as follows:

On December 13, 2018, Halo obtained an order to produce a statement of assets and to appear for examination in connection with her small claims judgment. (Halo Decl. Exh. 17.) A judgement debtor examination was scheduled for February 25, 2019. (Id.)

On or about December 19, 2018, Scuderi filed a third-party claim against Halo in the small claims court matter. (Sullivan Decl. Exh. 12.)  

On February 4, 2019, Scuderi filed the limited jurisdiction lawsuit alleging intentional interference with contractual relations.

On February 8, 2019, a hearing on the third-party claim took place. (Sullivan Decl. Exh. 3.) Scuderi argued that Halo could not enforce her judgment because he obtained a UCC lien on the security agreement prior to Halo’s recording of a lien. (Sullivan Exh. ¶ 37.) The court rejected Scuderi’s argument and allowed release of funds to Halo. (Sullivan Decl. Exh. 13.)

On February 25, 2019, a memorandum of garnishee was produced. (Halo Decl. Exh. 34.) The memorandum shows a check sent from Bank of America for $17.78. (Id.)

Also on February 25, 2019, Scuderi and Sullivan voluntarily dismissed their claim for intentional interference with contractual relations.

Halo argues that the February 4, 2019 filing of the lawsuit was intended to prevent her from conducting the debtor exam on February 25, 2019. Halo also argues that the garnishee memorandum reveals that Scuderi and Sullivan knew there was no money to be obtained from Stagecrafts and thus could not have legitimately been seeking to enforce the UCC lien. The Court finds that Halo has produced evidence indicative of malicious intent.

Attorney Advice

Scuderi argues that his bringing of the suit was not malicious as it was brought under advice of his attorney Sullivan. (Scuderi Decl. ¶ 7.)

The elements of the defense of advice-of-counsel requires the defendant to (1) make a full and honest disclosure of all important facts known to him and (2) reasonably rely in good faith on the attorney’s advice. (Bertero v. National General Corp. (1974) 13 Cal.3d 43.) The burden of proving this affirmative defense is borne by the party invoking it. (Id.) “Generally…the deliberate injection of the advice of counsel into a case waives the attorney-client privilege as to communications and documents relating to the advice.” (Transamerica Title Ins. Co. v. Superior Court (1987) 188 Cal.App.3d 1047, 1053.)

Here, Scuderi’s answer contains an affirmative defense that he acted on attorney advice. (Scuderi Answer pg. 3.) Scuderi states in his declaration that he made full and complete disclosure to Sullivan and relied on his advice in filing the lawsuit to protect his interest in the security agreement. (Scuderi Decl. ¶¶ 4-7.) At the first hearing, Halo’s counsel argued Scuderi’s initial declaration contained insufficient detail as to “full and honest” disclosure to Sullivan.

“[I]f the initiator acts in bad faith or withholds from counsel facts he knew or should have known would defeat a cause of action otherwise appearing from the information supplied, [the] defense fails.” (Bertero v. National General Corp. supra 13 Cal.3d 43, at 53-54.)

Upon submission, the Court agreed with Halo’s counsel and granted leave to Scuderi to amend his declaration as to advice-of-counsel.

Scuderi submitted an amended declaration in which he additionally declares:

I disclosed to Mr. Sullivan that there was a judgment against Stagecrafts for $5,000.00 (reduced from $7,500.00) on May 25, 2018, at my first meeting with Mr. Sullivan.

I was advised by Mr. Sullivan that an incorporator is not necessarily a member of an LLC unless he/she is listed as one in the corporate filings. I was also advised that if no abstract of judgment was filed by Adi Halo, my lien would have priority over Adi Halo's. I reasonably relied on these pieces of advice.

I never had any malice toward Adi Halo. I was attempting to collect a legitimate debt from Stagecrafts based upon my attorney John Sullivan's advice. I also dismissed my intentional interference with contract action based upon Mr. Sullivan's advice.

(Scuderi Supp. Decl. ¶¶ 3-5.)

The Court clarifies that the defense of advice-of-counsel primarily speaks to the “good cause” element of malicious prosecution, although this element often overlaps with that of malice. In determining an anti-SLAPP motion courts review the pleadings and affidavits stating the facts on which liability and defenses are based. (Jenkins v. Brandt-Hawley (2022) 86 Cal.App.5th 1357, 1376.) In doing so, courts do not evaluate the weight of evidence, instead accepting as true all evidence favorable to the plaintiff and assessing the defendant’s evidence only to determine if it defeats the plaintiff’s submission as a matter of law. (Id.)

In evaluating an affirmative defense with respect to an anti-SLAPP motion, the Court generally considers whether the defendant’s evidence in support of the affirmative defense is sufficient, and if so, whether the plaintiff has introduced contrary evidence negating it. (Bently Reserve LP v. Papaliolios (2013) 218 Cal.App.4th 418, 434.) The determination of whether there was full and honest disclosure to counsel is a determination of fact. (See Weber v. Leuschner (1966) 240 Cal.App.2d 829.) “Where the evidence is in conflict or subject to different inferences as to whether there was a full, fair and complete disclosure to the attorney of all of the facts of the case within the knowledge of the client or as to whether the client acted in good faith on the advice of the attorney, it is for the trier of fact to resolve such conflict or draw the credible inferences.” (Albertson v. Raboff (1960) 185 Cal.App.2d 372.) Where there is a dispute about material fact, the California Court of Appeals has held that the determination of an advice-of-counsel defense should be sorted out in trial. (See in Roche v. Hyde (2020) 51 Cal.App.5th 757, 827.)

III.            CONCLUSION

The Court finds Halo’s claim for malicious prosecution is not a SLAPP. Halo’s enforcement of her small claims judgment is absolutely privileged under Civil Code § 47. As such, Scuderi and Sullivan’s claim was legally untenable, and their suit lacked probable cause. Further, Halo provides evidence of malice.

Therefore, the Court DENIES Sullivan and Scuderi’s special motions to strike.

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RULING:

In the event the parties submit on this tentative ruling, or a party requests a signed order or the court in its discretion elects to sign a formal order, the following form will be either electronically signed or signed in hard copy and entered into the court’s records. 

ORDER 

Salvatore Scuderi & John Sullivan’s Special Motions to Strike, after having been continued, came on regularly for hearing on May 19, 2023, with appearances/submissions as noted in the minute order for said hearing, and the court, being fully advised in the premises, did then and there rule as follows: 

THE SPECIAL MOTIONS TO STRIKE ARE DENIED.

IT IS SO ORDERED. 

DATE:  May 19, 2023                            _______________________________ 

                                                                         F.M. TAVELMAN, Judge 

Superior Court of California 

County of Los Angeles