Judge: James L. Crandall, Case: 17-948432, Date: 2022-08-18 Tentative Ruling

1.   Demurrer to Amended Complaint

2.   Motion for SLAPP

Demurrer to Third Amended Complaint

Defendants’ demurrer to Plaintiff’s third amended complaint (TAC) is SUSTAINED without leave to amend as to the fourth, sixth, and seventh causes of action and OVERRULED as to the tenth cause of action.

4th COA – Quia Timet:

Quia timet is an equitable remedy and does not appear to be an independent cause of action. (Escrow Agents Fidelity Corp. v. Superior Court (1992) 4 Cal.App.4th 491, 494-495.) To seek this equitable remedy, Plaintiff must anticipate a future injury. (Ibid.)

Here, Plaintiff alleges at paragraphs 80-83, that Defendants owe money to Plaintiff in relation to Plaintiff’s subrogation cases which were handled by Defendants, and Defendants have failed to make a reserve to repay Plaintiff’s funds. At paragraphs 84-87, Plaintiff requests a judicial decree holding Defendants to account for all proceeds distributable to Plaintiff in connection with the subrogation cases.

Plaintiff cites Escrow Agents' Fidelity Corp. v. Superior Court, supra, 4 Cal.App.4th 491, in support of this cause of action. That case states the following:

“Even at the time the above cases were decided, quia timet relief was used sparingly. (Roman Catholic Archbishop of San Francisco, supra, 69 Cal. at p. 586, 11 P. 343.) Today, it has for the most part been forsaken in favor of statutory remedies. For example, a party who wants to enjoin a foreclosure sale, prevent a nuisance, or otherwise assert a right to real property (the traditional uses for quia timet), would seek injunctive relief and make effective use of the lis pendens statutes (Code Civ.Proc., §§ 409 et seq.). An aggrieved creditor might avail himself of the attachment law (Code Civ.Proc., § 481.010 et seq.), provided he is fortunate enough to have a debtor with assets to attach. An individual with a claim to personal property has at his disposal the claim and delivery statutes (Code Civ.Proc., § 511.010 et seq.).” (Id. at 495.)

Escrow Agents' Fidelity Corp. v. Superior Court, supra, 4 Cal.App.4th at 495-496, further holds:

“Quia timet is in fact especially suited to surety cases. (See, e.g., examples cited in Conners, Fidelity & Surety Bond Practice, supra, pp. 177–178.) “A surety or guarantor is one who promises to answer for the debt, default, or miscarriage of another ...” (Civ.Code, § 2787.) A surety is obligated by law to pay the creditor of its defaulting principal immediately upon the principal's default or defalcation. (Civ.Code, § 2807). Although a surety may file an action at law to compel its principal to perform the obligation on a bond when due (Civ.Code, § 2846), the fact that it may eventually obtain a judgment against the principal is of little comfort to the surety if, in the interim, the principal has absconded with the very funds which could have been used to satisfy the bond. Quia timet allows the surety to prevent the principal from dissipating those funds if the surety knows it will be called upon to “pay the debt or perform the obligation” on the bond, suspects that the principal has some or all of the necessary funds to do so, and fears that the principal may abscond with those funds.”

Here, Plaintiff has not alleged facts showing that the equitable doctrine of quia timet is applicable in this case. Plaintiff has not shown that this case is analogous to the surety and bond context of Escrow Agents' Fidelity Corp. v. Superior Court, supra, 4 Cal.App.4th at 495.

The Court has previously sustained Defendants’ demurrers to Plaintiff’s quia timet causes of action on 4/26/18 and 6/6/19, with leave to amend. Plaintiff has not shown that additional facts exist which could support this cause of action. Therefore, the demurrer to the fourth cause of action is sustained without leave to amend.

6th COA – Fraud and Deceit [Intentional Misrepresentation]:

The essential elements for intentional misrepresentation are (1) a misrepresentation, (2) knowledge of falsity, (3) intent to induce reliance, (4) actual and justifiable reliance, and (5) resulting damage. (Chapman v. Skype Inc. (2013) 220 Cal.App.4th 217, 230-231.)

Every element of fraud must be pleaded with specificity. The particularity requirement for fraud requires the pleading of facts showing how, when, where, to whom, and by what means the representations were made. (Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73.) This is to provide the defendant with notice and to give the court enough information to assess whether there is a foundation for the charge of fraud. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216.) Nonetheless, “[l]ess specificity is required when it appears from the nature of the allegations that the defendant must necessarily possess full information concerning the facts of the controversy.” (Id. at 216 (citation and internal quote marks omitted)

“Generally, actionable misrepresentation must be one of existing fact; ‘predictions as to future events, or statements as to future action by some third party, are deemed opinions, and not actionable fraud…’” (Cohen v. S & S Construction Co. (1983) 151 Cal.App.3d 941, 946.) Exceptions include (1) where a party holds himself out to be specially qualified and the other party is so situated that he may reasonably rely upon the former’s superior knowledge and (2) where the opinion is by a fiduciary or other trusted person. (Ibid.)

Here, Plaintiff alleges at paragraph 100 that “on or about July 30, 2013, Defendants . . . submitted a written response to a Request for Proposal, and, in so doing, knowingly and intentionally made the following false written statements to Plaintiff: (A) ‘The ultimate goal is to maximize recoveries, minimize expenses, and return the highest net recovery to our clients;’ (B) ‘We emphasize to our staff they are an extension of our client’s operations.’; (C) ‘We utilize a quality review person to make sure we are adhering to our processes and procedures.’”

At paragraph 101, Plaintiff alleges Defendants “entered into the SSA without any intention of ever performing their obligations thereunder as more particularly described in the SSA. Defendants’ fraudulent secret intention not to perform can be inferred under Tenzer v. Superscope Inc. (1985) 39 Cal.3d 18 from such circumstances as Defendants’ admitted insolvency, Defendants’ hasty repudiation of their promises relative to the performance of their obligations with respect to the recovery of Plaintiff’s subrogation claims, and Defendants’ continued false assurances of future performance after it was clear that they would not perform their obligations with respect to the recover of Plaintiff’s subrogation claims.”

At paragraphs 103-118, Plaintiff alleges Defendants submitted written reports between and January 2016 and May 2017 which “contained intentional misrepresentations of fact relative to the correct amount that should have been distributed to Plaintiff as of the date of the written report,” resulting in money due to Plaintiff in excess of $3 million.

At paragraphs 122 and 125, Plaintiff alleges it relied on false representations by Defendants that Defendants acted in good faith and sought to continue the relationship. At paragraph 126, Plaintiff alleges it relied on the assurance of Defendant’s attorney Mr. Cox that Defendant would begin repaying certain funds.

Plaintiff has not alleged sufficient facts in support of the sixth cause of action. For example, Plaintiff has not alleged facts showing that Defendants made specific misrepresentations in the monthly reports which were knowingly false, that Plaintiff’s reliance on such false statements was justifiable, or explained how Plaintiff suffered damages as a result of such misrepresentations in excess of Plaintiff’s underlying damages for the alleged breach of contract.

Plaintiff’s allegations regarding Defendants’ statements of their qualifications at paragraph 100 are insufficient because such general statements constitute “dealer’s talk” or “puffing,” which is generally not actionable. (Schonfeld v. City of Vallejo (1975) 50 Cal.App.3d 401, 412; Pacesetter Homes, Inc. v. Brodkin (1970) 5 Cal.App.3d 206, 211.)

Finally, Plaintiff has not shown that the assurances of Defendants’ representatives alleged in paragraphs 122, 125, and 126 support the fraud claim because there are no facts demonstrating that the statements were knowingly or intentionally false or that Plaintiff justifiably relied on the statements to its detriment.

Plaintiff has been given multiple opportunities to amend this cause of action, and Plaintiff fails to identify additional facts that can be pled to support the cause of action. Therefore, the demurrer to the sixth cause of action is sustained without leave to amend.

7th COA – Constructive Fraud [Concealment]:

Under Civil Code section 1573, constructive fraud includes “any breach of duty which, without an actually fraudulent intent, gains an advantage to the person in fault, or any one claiming under him, by misleading another to his prejudice, or to the prejudice of any one claiming under him.” (See CACI 4111.)

“A fiduciary relationship is ‘any relation existing between parties to a transaction wherein one of the parties is in duty bound to act with the utmost good faith for the benefit of the other party. Such a relation ordinarily arises where a confidence is reposed by one person in the integrity of another, and in such a relation the party in whom the confidence is reposed, if he voluntarily accepts or assumes to accept the confidence, can take no advantage from his acts relating to the interest of the other party without the latter’s knowledge or consent ....’” (Hodges v. County of Placer (2019) 41 Cal.App.5th 537, 546.) “Traditional examples of fiduciary relationships in the commercial context include trustee/beneficiary, directors and majority shareholders of a corporation, business partners, joint adventurers, and agent/principal.” (Wolf v. Superior Court (2003) 107 Cal.App.4th 25, 30.)

“A confidential relationship exists when one party gains the confidence of the other and purports to act or advise with the other’s interest in mind.” (Younan v. Equifax Inc. (1980) 111 Cal.App.3d 498, 517.) “While kinship or friendship are elements, they do not necessarily create a confidential relationship.” (Kudokas v. Balkus (1972) 26 Cal.App.3d 744, 750.)

Here, Plaintiff’s seventh cause of action for constructive fraud is based largely on the same facts as the sixth cause of action, summarized above. While constructive fraud is subject to a lower standard, including the absence of a fraudulent intent requirement, the seventh cause of action is still insufficient for the reasons described above under the sixth cause of action. Plaintiff’s TAC fails to allege specific misrepresentations or omissions of material fact which resulted in prejudice to Plaintiff.

The demurrer to the seventh cause of action is sustained without leave to amend.

10th COA – Specific Performance:

A complaint for specific performance must allege the following: (1) A specifically enforceable type of contract, sufficiently certain in its terms; (2) Adequate consideration, and a just and reasonable contract; (3) The plaintiff’s performance, tender, or excuse for nonperformance; (4) The defendant’s breach; and (5) Inadequacy of the remedy at law. (Darbun Enterprises, Inc. v. San Fernando Community Hospital (2015) 239 Cal.App.4th 399, 409, fn 5.) In addition, the terms “must be sufficiently certain ‘to make the precise act which is to be done clearly ascertainable.’” (Id. at 409.)

Here, paragraph 170 of the TAC alleges Defendants “were required to allow Plaintiff to periodically audit the records, process and procedures of Defendants . . . with respect to adherence to the terms of the SSA, and . . . to make all records available and cooperate with respect to all such periodic audits. Further, under the terms of the SSA, Plaintiff is entitled to delivery to Plaintiff of all client materials . . .” At paragraph 174, Plaintiff alleges Defendants have violated these provisions.

The tenth cause of action is improper and redundant insofar as it seeks monetary damages, which are already encompassed by the eleventh cause of action for breach of contract. However, Plaintiff has adequately alleged a claim for specific performance based on paragraphs 170 and 174 of the TAC. Therefore, the demurrer to the tenth cause of action is overruled.

2.Motion to Strike Under Anti-SLAPP Statute

Defendants’ special motion to strike under the anti-SLAPP statute is GRANTED as to paragraphs 126 and 157 of the TAC and DENIED as to the remaining allegations encompassed by the motion.

Defendants move to strike the sixth and seventh causes of action under the anti-SLAPP statute, Code of Civil Procedure section 425.16, as well as paragraphs 47 and 49-55 of the TAC.

Although the Court has sustained the demurrer to the sixth and seventh causes of action without leave to amend, Defendants are entitled to a ruling on the anti-SLAPP motion in order to determine attorney fees under section 425.16(c)(1). (See Pfeiffer Venice Properties v. Bernard (2002) 101 Cal.App.4th 211, 219.)

Plaintiff’s request for judicial notice of the Illinois Collection Agency Act is granted.

Defendants argue that the sixth and seventh causes of action are based on the privileged prelitigation settlement communications of Defendant Acclaim’s counsel, Mr. Cox, to Plaintiff’s representatives. Specifically, paragraph 126 of the TAC (sixth cause of action) includes the following allegation:

“. . . Plaintiff justifiably relied upon the false representations made regarding the status of its claims and the payment thereof by not taking action to enforce its rights based upon the fact that Clay Cox, who was then an attorney for Defendant Acclaim Resource Partners LLC, for and on behalf of Defendant Acclaim Resource Partners LLC, by an email dated August 24, 2017 to Michael Kelly, then an employee of Plaintiff, reassured Plaintiff of the good faith and integrity of Defendants, and each of them, by stating, “First, [Acclaim] will absolutely begin paying the $580,000 plus amounts received in connection with [Plaintiff’s0 matters subsequent to the date that the $580,000 was calculated. I had discussed with them the possibility of simply making that in a lump sum payment. They indicated to me that this could cause problems in terms of record-keeping both for them and [Plaintiff]. They indicated to me that they are in a position to begin issuing checks appropriately connected to claims no later than Wednesday, August 30. All checks would be sent to your office by overnight courier. They would continue issuing checks as quickly as they could process the claims to which they relate. [] To be clear, …, Acclaim will begin making payment of the $580,000 in accordance with the procedure described above.”

Paragraph 157 of the TAC (seventh cause of action) contains a substantially identical allegation regarding the communication by Mr. Cox.

“Section 425.16 posits ... a two-step process for determining whether an action is a [strategic lawsuit against public participation]. 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 must then determine whether the plaintiff has demonstrated a probability of prevailing on the claim.” (Navellier v. Sletten (2002) 29 Cal.4th 82, 88.) “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.” (Id. at 89.)

“The sole inquiry under the first prong of the anti-SLAPP statute is whether the plaintiff’s claims arise from protected speech or petitioning activity. [Citation.] Our focus is on the principal thrust or gravamen of the causes of action, i.e., the allegedly wrongful and injury-producing conduct that provides the foundation for the claims.” (Castleman v. Sagaser (2013) 216 Cal.App.4th 481, 490–491.)

Digerati Holdings, LLC v. Young Money Entertainment, LLC (2011) 194 Cal.App.4th 873, 883, held that prelitigation communications constituted protected activity under Code of Civil Procedure section 425.16, subdivisions (e)(1) and (2), which protect the following:

“(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.”

In Digerati, supra, 194 Cal.App.4th at 886-887, the Court of Appeal held,

“Statements made before an “official proceeding” or in connection with an issue under consideration or review by a legislative, executive, or judicial body, or in any other “official proceeding,” as described in clauses (1) and (2) of section 425.16, subdivision (e), are not limited to statements made after the commencement of such a proceeding. Instead, statements made in anticipation of a court action or other official proceeding may be entitled to protection under the anti-SLAPP statute. “ ‘[J]ust as communications preparatory to or in anticipation of the bringing of an action or other official proceeding are within the protection of the litigation privilege of Civil Code section 47, subdivision (b) [citation], ... such statements are equally entitled to the benefits of section 425.16.’ [Citations.]” (Briggs, supra, 19 Cal.4th at p. 1115, 81 Cal.Rptr.2d 471, 969 P.2d 564; accord, Flatley v. Mauro (2006) 39 Cal.4th 299, 322, fn. 11, 46 Cal.Rptr.3d 606, 139 P.3d 2.)

The California Supreme Court has stated that a prelitigation communication is privileged only if it “relates to litigation that is contemplated in good faith and under serious consideration.” (Action Apartment Assn., Inc. v. City of Santa Monica (2007) 41 Cal.4th 1232, 1251, 63 Cal.Rptr.3d 398, 163 P.3d 89 (Action Apartment ).) “Good faith” in this context refers to a good faith intention to file a lawsuit rather than a good faith belief in the truth of the communication. (Ibid.) Similarly, the Courts of Appeal have stated that a prelitigation statement falls within clause (1) or (2) of section 425.16, subdivision (e) if the statement “ ‘concern[s] the subject of the dispute’ and is made ‘in anticipation of litigation “contemplated in good faith and under serious consideration” ’ [citation].” (Neville v. Chudacoff (2008) 160 Cal.App.4th 1255, 1268, 73 Cal.Rptr.3d 383; accord, Rohde v. Wolf (2007) 154 Cal.App.4th 28, 37, 64 Cal.Rptr.3d 348.)”

The court in Digerati, supra, at 887-888, concluded,

“We conclude that Young Money's and Carter's statements made through their attorney to Digerati protesting the exhibition of the film and asserting a right of final approval, and their alleged statements made to distributors that the film was not authorized and threatening them with litigation, concerned the subject of the dispute over the right of final approval and that the statements were made in anticipation of a lawsuit by Young Money and Carter against Digerati and the distributors. In light of the statements themselves, the declarations by Bryant and attorneys for Young Money and Carter describing these events, and the fact that Young Money and Carter commenced this litigation soon after the alleged statements were made to Digerati and the distributors, we conclude that the evidence compels the conclusion that, at the time they made the statements, Young Money and Carter seriously and in good faith contemplated commencing litigation against Digerati and the distributors to enforce their rights under the agreement. We therefore conclude that these prelitigation communications were statements made in furtherance of Young Money's and Carter's right of petition pursuant to clause (2) of section 425.16, subdivision (e).”

Here, Defendants have shown that communications by Defendant’s counsel Mr. Cox were protected settlement communications under Digerati, supra. Defendants describe the communications regarding this dispute which led to Mr. Cox’s 8/24/17 email to Plaintiff’s representatives. Mr. Cox declares that the communications were initiated in August 2017 by a letter from Plaintiff’s general counsel threatening litigation, to which Mr. Cox responded by stating, “In an attempt to avoid litigation . . . I would like to suggest that we engage in a conference. . .” (Cox Decl., ¶ 3.) At the outset of the conference call on 8/16/17, Plaintiff’s counsel stated they intended the call to be covered by settlement privilege and received confirmation of such from all parties on the call. (Id. at ¶ 5.) The call was followed by several emails attempting to resolve the dispute, including Mr. Cox’s 8/24/17 email which included the statement that Defendant would like to reach an “arrangement” to continue doing business, which process “could continue concurrently with legal discussions between legal counsel for both parties.” (Id. at ¶ 6 and Exhibit C.)

This lawsuit was commenced less than two months after the 8/24/17 email, on 10/6/17.

Plaintiff has submitted declarations of its counsel in opposition, stating that “litigation was not under serious consideration” at the time of the disputed communications, as Plaintiff “wanted to get its money without litigation” and hadn’t yet hired outside counsel. However, these declarations are conclusory and fail to rebut Defendants’ evidence, which shows that the communications by Defendant’s counsel Mr. Cox were made in the context of Defendants’ reasonable belief that Plaintiff was seriously considering litigation regarding the dispute.

Based on the foregoing, Plaintiff has met its burden as to the first prong of the anti-SLAPP analysis as to paragraphs 126 and 157 of the TAC.

However, Plaintiff has not presented evidence supporting the first prong as to the remaining allegations in the TAC which Plaintiff moves to strike. Defendants fail to explain the connection between the allegations related to Mr. Cox’s communications and the remaining allegations which Defendants move to strike. As discussed above under the Court’s analysis of the demurrer, Plaintiff’s sixth and seventh causes of action are based on a number of allegations which do not constitute protected speech, including Defendants’ submission of monthly reports under the parties’ contract and other communications which were not related to settlement or otherwise constituting protected speech. Plaintiff has not presented evidence that allegations other than paragraphs 126 and 157 allege protected speech under the anti-SLAPP statute.

As for the second prong, Plaintiff has not established a probability of prevailing on the sixth and seventh causes of action for the reasons discussed in the Court’s analysis of Defendants’ demurrer above.

Finally, Plaintiffs contend that an allegation can only be struck under the anti-SLAPP statute if the protected speech is the wrong complained of, rather than mere evidence supporting liability under Park v. Board of Trustees (2017) 2 Cal.5th 1057, 1060.

Golden Gate Land Holdings LLC v. Direct Action Everywhere (Cal. Ct. App., July 13, 2022, No. A163315) 2022 WL 2711824, at *3, holds:

“In Park, supra, 2 Cal.5th 1057, 217 Cal.Rptr.3d 130, 393 P.3d 905, our state Supreme Court discussed the “requisite nexus between the claims an anti-SLAPP motion challenges and protected activity.” (Id. at p. 1062, 217 Cal.Rptr.3d 130, 393 P.3d 905, italics and some capitalization omitted.) “[A] claim is not subject to a motion to strike simply because it contests an action or decision that was arrived at following speech or petitioning activity, or that was thereafter communicated by means of speech or petitioning activity. Rather, a claim may be struck only if the speech or petitioning activity itself is the wrong complained of, and not just evidence of liability or a step leading to some different act for which liability is asserted.” (Id. at p. 1060, 217 Cal.Rptr.3d 130, 393 P.3d 905.) Thus, in evaluating an anti-SLAPP motion, “courts should consider the elements of the challenged claim and what actions by [the] defendant supply those elements and consequently form the basis for liability.” (Id. at p. 1063, 217 Cal.Rptr.3d 130, 393 P.3d 905; see Wong v. Wong (2019) 43 Cal.App.5th 358, 366, 256 Cal.Rptr.3d 624.)”

Here, the TAC alleges at paragraph 157, “Plaintiff justifiably relief upon the false representations made regarding the status of its claims and the payment thereof by not taking action to enforce its rights based upon . . .” the communication by Mr. Cox. Therefore, Plaintiff is attempting to use Mr. Cox’s communication as a basis for Defendants’ liability, including to support the element of justifiable reliance under the sixth and seventh causes of action. Therefore, Plaintiff has alleged that the communication by Mr. Cox is the “wrong complained of” under Park, supra, 2 Cal.5th 1057, and this allegation is subject to Defendants’ anti-SLAPP motion.

Therefore, the motion is GRANTED as to paragraphs 126 and 157 of the TAC only and DENIED as to the remaining allegations encompassed by the motion.

Defendants may file a separate noticed motion for attorney fees under Code of Civil Procedure section 425.16(c)(1). (See Pfeiffer Venice Properties v. Bernard (2002) 101 Cal.App.4th 211, 219.

 

3.   Trial Setting Conference

 

 

Future hearing dates

No future hearing dates