Judge: Teresa A. Beaudet, Case: 22STCV13629, Date: 2023-10-09 Tentative Ruling

Case Number: 22STCV13629    Hearing Date: October 31, 2023    Dept: 50

Superior Court of California

County of Los Angeles

Department 50

Background

On April 25, 2022, Plaintiffs Janet Haywood and 8424 Western Plaza LLC filed this action against Defendants Stephen Cho and Creative Recovery Concepts (jointly, “Defendants”).

On February 9, 2023, Janet Haywood (“Plaintiff”) filed the operative First Amended Complaint (“FAC”) in this action against Defendants, alleging causes of action for (1) breach of contract, (2) breach of implied covenant of good faith and fair dealing, and (3) conspiracy to commit fraud.   

In FAC, Plaintiff alleges that in 2017, she retained Stephen Cho to represent her in a lawsuit filed in the Los Angeles County Superior Court known as “Genus v. Haywood,” a dispute arising out of an improved parcel of residential property owned and/or controlled by Plaintiff and located at 10427 S. Denker Avenue, Los Angeles, California (the “Denker Property”). (FAC, ¶ 7.) Plaintiff alleges that Stephen Cho “aggressively litigated the case, in the process conducting elaborate unnecessary Discovery as well as engaging in unnecessary litigation activities that were not prudent given the ‘big picture’ economic constraints of the litigation, with the legal fees increasing exorbitantly with the passing of each month…” (FAC, ¶ 8.)

            Plaintiff alleges that Stephen Cho “pressured and coerced [Plaintiff] to participate…in a Settlement Conference,” and that during the Settlement Conference, Plaintiff “caved into the active efforts of [Stephen Cho] to induce if not compel [Plaintiff] to settle the dispute…” (FAC, ¶ 11.) Plaintiff further alleges that Stephen Cho falsely informed Plaintiff that she “faced the prospect of being incarcerated by the trial judge” if Plaintiff did not relinquish her interest in the Denker Property for the amount of $650,000.00. (FAC, ¶ 12.)

In addition, Plaintiff alleges that after the settlement was memorialized, Stephen Cho “passed off his large Bill for attorneys fees to [Creative Recovery Concepts], who aggressively sought payment of the attorneys fees from [Plaintiff]…” (FAC, ¶ 14.) Plaintiff alleges that “[t]he Draconian collection actions of [Creative Recovery Concepts] confirmed [Plaintiff’s] suspicions that the reason that [Stephen Cho] racked up such and [sic] exorbitant amount of unnecessary attorneys fees when he intended to induce settlement was because [Stephen Cho] was overtly engaging in actions to manifest the and act out a [conspiratorial scheme] to use [Creative Recovery Concepts] to collect aggressively his exorbitant and worthless attorneys fees…” (FAC, ¶ 15.)

On July 6, 2023, M. Stephen Cho, Esq., erroneously sued as Stephen Cho (herein, “Cho”) filed a special motion to strike pursuant to Code of Civil Procedure section 425.16. The motion is unopposed.

Request for Judicial Notice

The Court grants Cho’s request for judicial notice as to Exhibits A, B, and D-Q. The Court denies Cho’s request as to Exhibit C.

Discussion

The anti-SLAPP statute is “a mechanism through which complaints that arise from the exercise of free speech rights can be evaluated at an early stage of the litigation process and resolved expeditiously.” (Simmons v. Allstate Ins. Co. (2001) 92 Cal.App.4th 1068, 1073 [internal quotations omitted].) Courts use a two-step process for determining whether an action is a strategic lawsuit against public participation, or a SLAPP. First, the court determines whether the defendant has established that the challenged claim arises from protected speech. (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67.) If such a showing has been made, the court “determines whether the plaintiff has demonstrated a probability of prevailing on the claim.” (Ibid.)

A.    Cho’s Assertion that the FAC is a Sham Complaint

As an initial matter, Cho argues in the instant motion that “the FAC should be disregarded because it is a sham Complaint.” (Mot. at p. 11:2-3.) Cho argues that “[t]he plaintiff has not (because she cannot) explained why she has changed the theories of liability and omitted harmful allegations in the FAC as compared to the original complaint. As such, Mr. Cho submits that the court should disregard the FAC in its entirety or in the alternative read the malpractice and conversion/illegal levy allegations into the FAC.” (Mot. at p. 11:22-26.)

As an initial matter, it is unclear on what legal basis Cho is requesting that the Court “disregard the FAC in its entirety or in the alternative read the malpractice and conversion/illegal levy allegations into the FAC.” (Mot. at p. 11:23-26.) As set forth above, the instant motion is captioned as a “Special Motion to Strike,” and Cho states that “[t]he motion is made pursuant to Code of Civil Procedure § 425.16 on the grounds that the conduct giving rise to complaint is admittedly protected under § 425.16(e) and further that Plaintiffs cannot establish a probability of prevailing on their claims.” (Notice of Motion at p. 2:4-6.) As discussed above, “Section 425.16, subdivision (b)(1) 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. The moving defendant's burden is to demonstrate that the act or acts of which the plaintiff complains were taken ‘in furtherance of the [defendant]’s right of petition or free speech under the United States or California Constitution in connection with a public issue,’ as defined in the statute. (§ 425.16, subd. (b)(1).) If the court finds such a showing has been made, it then determines 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.) Thus, the Court does not see how Cho’s assertion that the “FAC should be disregarded because it is a sham Complaint” is relevant to the Court’s analysis of a special motion to strike under Code of Civil Procedure section 425.16. Accordingly, the Court declines to “disregard” the FAC.

B.     Cho’s Arguments Concerning the Original Complaint

The Court also notes that Cho’s motion contains a section entitled “Application of Anti-SLAPP Statute to Original Complaint.” (Mot. at p. 14:8-9.) Cho asserts that “since the FAC is a sham complaint, the court would be correct in ruling that the 2nd c/a for conversion in the original complaint should be stricken.” (Mot. at p. 15:25-16:2.)

As set forth above, the FAC is the operative complaint in this matter. The Court notes that “[a]n amendatory pleading supersedes the original one, which ceases to perform any function as a pleading. The amended complaint furnishes the sole basis for the cause of action, and the original complaint ceases to have any effect either as a pleading or as a basis for judgment…Because there is but one complaint in a civil action…the filing of an amended complaint moots a motion directed to a prior complaint…” (JKC3H8 v. Colton (2013) 221 Cal.App.4th 468, 477 [internal quotations and citations omitted].) In addition, “[s]o too does an amended complaint render moot an anti-SLAPP motion directed to a prior complaint, with the following caveat: A plaintiff or cross-complainant may not seek to subvert or avoid a ruling on an anti-SLAPP motion by amending the challenged complaint or cross-complaint in response to the motion.” (Id. at pp. 477-478.)

Here, Cho does not argue that Plaintiff is seeking to avoid a ruling on the instant anti-SLAPP motion by amending the original Complaint in response to the instant motion. The instant motion was filed on July 6, 2023, after the operative FAC was filed on February 9, 2023. Thus, to the extent Cho is requesting that the Court strike the second cause of action of the original Complaint, the Court denies such request as moot.  

C.     Prong One – Arising from Protected Activity

As to the FAC, Cho asserts that “in the event that the court determines that the First Amended Complaint is not a sham complaint (it is), the 3rd cause of action in the FAC is subject being stricken.” (Mot. at p. 16:5-7.)

“[T]he only thing the defendant needs to establish to invoke the protection of the SLAPP statute is that the challenged lawsuit arose from an act on the part of the defendant in furtherance of her right of petition or free speech.” (Fox Searchlight Pictures, Inc. v. Paladino (2001) 89 Cal.App.4th 294, 307.)          

An act in furtherance of a person’s right of petition or free speech includes 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, (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.

(Code Civ. Proc., § 425.16, subd. (e).)

In determining whether a cause of action arises from protected conduct, the court focuses on “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.) “[T]he critical consideration is whether the cause of action is¿based on¿the defendant’s protected free speech or petitioning activity.” (Navellier v. Sletten (2002) 29 Cal.4th 82, 89 [emphasis in original].) In making this determination, the Court considers “the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based.” (Ibid.) “The anti-SLAPP statute should be broadly construed and a plaintiff cannot avoid operation of the anti-SLAPP statute by attempting, through artifices of pleading, to characterize an action as a garden variety tort claim when in fact the liability claim is predicated on protected speech or conduct.” (Ramona Unified School Dist. v. Tsiknas (2005) 135 Cal.App.4th 510, 519 [internal citations omitted].) 

Here, in the third cause of action of the FAC for “conspiracy to defraud,” Plaintiff alleges that “[Plaintiff] and [Cho] entered into a contract in which [Cho] promised to provide useful and valuable legal services in exchange for [Plaintiff’s] promise to pay him legal fees and costs for those useful and valuable legal services.” (FAC, ¶ 23, p. 7, emphasis omitted.) Plaintiff alleges that “[i]n reality, the decision by [Cho] and DEFENDANT CREATIVE RECOVERY was an overt act that manifested the purpose of their CONSPIRACY TO DEFRAUD in which [Plaintiff] was their victim.” (FAC, ¶ 21, p. 7, emphasis omitted.)

Plaintiff further alleges that “[Cho] engaged in overt acts in furtherance of this CONSPIRACY TO DEFRAUD by racking up exorbitant unnecessary attorneys fees while knowing full well that he intended to settle the litigation, and that such legal efforts were superfluous and unnecessary, but [Cho] relentlessly pursued and charged these fees because he knew that most if not all of them would be collected by DEFENDANT CREATIVE RECOVERY, which engaged in overt acts in furtherance of the CONSPIRACY TO DEFRAUD by acting as [Cho’s] ‘in house’ COLLECTION STRONG ARM, with DEFENDANT CREATIVE RECOVERY’s sole purpose to collect aggressively most if not all of the exorbitant and unnecessary legal fees racked up by [Cho] on cases that he intended to settle despite incurring unnecessarily the fees and expenses normally only expended for cases that actually must be taken to trial.” (FAC, ¶ 22, pp. 7-8, emphasis omitted.) In addition, in the “factual background” section of the FAC, Plaintiff alleges that “with the ink barely even dry on the legal documents memorializing the settlement, [Cho] passed off his large Bill for attorneys fees to DEFENDANT CREATIVE RECOVERY, who aggressively sought payment of the attorneys fees from [Plaintiff], even going so far as to commence litigation against [Plaintiff] as well as engage in overly aggressive efforts to obtain a ‘silent’ Default Judgment against [Plaintiff] that DEFENDANT CREATIVE RECOVERY used to levy the bank accounts of [Plaintiff] and her immediate family…” (FAC, ¶ 14, pp. 4-5.)

Plaintiff asserts that the “gravamen of the 3rd c/a is that Mr. Cho conspired with CRC to file the collection complaint.” (Mot. at p. 17:1-2.) Plaintiff cites Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 511, where the California Supreme Court noted that “[s]tanding alone, a conspiracy does no harm and engenders no tort liability. It must be activated by the commission of an actual tort. A civil conspiracy, however atrocious, does not per se give rise to a cause of action unless a civil wrong has been committed resulting in damage. A bare agreement among two or more persons to harm a third person cannot injure the latter unless and until acts are actually performed pursuant to the agreement. Therefore, it is the acts done and not the conspiracy to do them which should be regarded as the essence of the civil action.” (Internal quotations and citations omitted.) Cho asserts that here, “[u]nder Applied, it is the acts done and not the conspiracy to do them which should be regarded as the essence of the civil action. Here, the act done, was the filing of the collection complaint.” (Mot. at p. 17:3-5.)

Cho further asserts that “the filing of the collection complaint is protected conduct.” (Mot. at p. 17:2.) Cho cites to Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1056, where the California Supreme Court noted that “[u]nder Code of Civil Procedure section 425.16 ‘[a] cause of action against a person arising from any act of that person in furtherance of the person’s right of petition or free speech … shall be subject to a special motion to strike…‘A cause of action ‘arising from’ defendant’s litigation activity may appropriately be the subject of a section 425.16 motion to strike.’…‘Any act’ includes communicative conduct such as the filing, funding, and prosecution of a civil action. This includes qualifying acts committed by attorneys in representing clients in litigation.” (Internal citations omitted.)

As set forth above, Plaintiff does not oppose the instant motion, and thus does not dispute that the third cause of action of the FAC arises from protected activity for purposes of the anti-SLAPP statute.

Based on the foregoing, the Court finds that Cho has established that Plaintiff’s third cause of action arises out of protected activity for purposes of the anti-SLAPP statute. The first prong of the two-step anti-SLAPP analysis is thus satisfied, and the burden now shifts to Plaintiff on prong two.  

A.    Prong Two – Probability of Prevailing 

“[P]laintiff 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.” (Premier Medical Management Systems, Inc. v. California Ins. Guarantee Assn. (2006) 136 Cal.App.4th 464, 476 [internal quotations omitted].) In making the prong two determination, “the court shall consider the pleadings, and supporting¿and opposing¿affidavits stating the facts upon which the liability or defense is based.”¿(Code Civ. Proc., § 425.16, subd. (b)(2).) “The court does not, however, weigh [defendant’s]¿evidence against the plaintiff’s, in terms of either credibility or persuasiveness.¿Rather, the defendant’s evidence is considered with a view toward whether it defeats the plaintiff’s showing as a matter of law, such as by establishing a defense or the absence of a necessary element.”¿(1-800 Contacts, Inc. v. Steinberg (2003) 107 Cal.App.4th 568, 585.) 

            Cho asserts that the litigation privilege bars Plaintiff’s third cause of action. Civil Code section 47 provides in part that, subject to certain exceptions, “[a] privileged publication or broadcast is one made…(b) In any…(2) judicial proceeding.” (Ibid., § 47.)

Cho cites to Rusheen v. Cohen, supra, 37 Cal.4th at page 1057, where the California Supreme Court noted that “[t]he privilege recognized in section 47 derives from common law principles establishing a defense to the tort of defamation. Although originally enacted with reference to defamation…the privilege is now held applicable to any communication, whether or not it amounts to a publication…and all torts except malicious prosecution…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…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. Thus, communications with some relation to judicial proceedings are absolutely immune from tort liability by the litigation privilege. It is not limited to statements made during a trial or other proceedings, but may extend to steps taken prior thereto, or afterwards.” (Internal quotations and citations omitted.) “The [p]leadings and process in a case are generally viewed as privileged communications.” (Id. at p. 1058 [internal quotations omitted].)

As discussed, Cho asserts that here, “[t]he gravamen of the 3rd c/a is that Mr. Cho conspired with CRC to file the collection complaint.” (Mot. at p. 17:1-2.) As set forth above, Plaintiff alleges in the third cause of action that “[Cho] engaged in overt acts in furtherance of this CONSPIRACY TO DEFRAUD by racking up exorbitant unnecessary attorneys fees while knowing full well that he intended to settle the litigation, and that such legal efforts were superfluous and unnecessary, but [Cho] relentlessly pursued and charged these fees because he knew that most if not all of them would be collected by DEFENDANT CREATIVE RECOVERY, which engaged in overt acts in furtherance of the CONSPIRACY TO DEFRAUD by acting as [Cho’s] ‘in house’ COLLECTION STRONG ARM, with DEFENDANT CREATIVE RECOVERY’s sole purpose to collect aggressively most if not all of the exorbitant and unnecessary legal fees racked up by [Cho] on cases that he intended to settle despite incurring unnecessarily the fees and expenses normally only expended for cases that actually must be taken to trial.” (FAC, ¶ 22, pp. 7-8, emphasis omitted.) Plaintiff further alleges that “[Cho] passed off his large Bill for attorneys fees to DEFENDANT CREATIVE RECOVERY, who aggressively sought payment of the attorneys fees from [Plaintiff], even going so far as to commence litigation against [Plaintiff] as well as engage in overly aggressive efforts to obtain a ‘silent’ Default Judgment against [Plaintiff] that DEFENDANT CREATIVE RECOVERY used to levy the bank accounts of [Plaintiff] and her immediate family…” (FAC, ¶ 14, pp. 4-5.)

As discussed, Plaintiff does not oppose the instant motion and thus does not dispute that the litigation privilege bars the third cause of action of the FAC. Based on the foregoing, the Court does not find that Plaintiff has demonstrated a probability of prevailing on the third cause of action of the FAC.

Conclusion

Based on the foregoing, the Court grants Cho’s special motion to strike as to the third cause of action of the FAC. Cho’s motion is otherwise denied.   

Cho is ordered to give notice of this ruling. 

DATED:  October 31, 2023                           

________________________________

Hon. Rolf M. Treu

Judge, Los Angeles Superior Court