Opinion
A148550
01-10-2018
CRYSTAL LEI et al., Plaintiffs and Respondents, v. DEMAS YAN, Defendant and Appellant.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (San Francisco City & County Super. Ct. No. CGC-14-541875)
I. INTRODUCTION
Demas Yan (Yan) appeals from an order denying his special motion to strike two causes of action from respondents' first amended complaint (FAC) pursuant to section 425.16 of the Code of Civil Procedure (section 425.16). Section 425.16, California's anti-SLAPP statute, "provides a procedure for weeding out, at an early stage, meritless claims arising from protected [speech and petitioning] activity." (Baral v. Schnitt (2016) 1 Cal.5th 376, 384 (Baral), italics omitted.) Our standard of review is de novo. (Sanowicz v. Bacal (2015) 234 Cal.App.4th 1027, 1035.) We affirm.
Statutory references are to the Code of Civil Procedure unless otherwise stated.
II. STATEMENT OF FACTS
A. Background
This lawsuit is part of a long list of cases arising out of a 2003 dispute over a real estate development project on Chenery Street in San Francisco (the Chenery Project). The initial dispute was between Yan and his former business associate Tony Fu (Fu). Respondent Crystal Lei (Lei) is Fu's ex-wife, and respondent Bryant Fu (Bryant) is Fu's son. On September 26, 2014, respondents filed this lawsuit against Yan and others. Their May 2015 FAC targets two distinct sets of defendants. Yan and his father are named defendants in causes of action for malicious prosecution and fraud.
B. FAC Allegations
Factual allegations in support of respondents' claims against Yan are set forth in a background section of the FAC. According to those allegations, Yan and Fu were co-investors in the Chenery Project. In 2003, they "had a falling-out over business issues," which led Yan to exclude Fu from further participation in the Chenery Project, thus "preventing Fu from sharing in the profits realized at the completion of the development." In 2004, Yan filed a lawsuit against Fu arising out of their dispute over the Chenery Project (the 2004 action). Yan named Fu's sister, Stella Chen (Chen), as a defendant because she held a promissory note that was secured by the Chenery project.
In December 2004, Yan filed for bankruptcy and the 2004 action was removed to bankruptcy court. The bankruptcy judge ruled that (1) Yan was required to pay his obligation under Chen's deed of trust; (2) Yan was not entitled to any relief against Chen, Fu, or Wei Suen (Suen), who was an assignee of Fu's interest in the Chenery project; and (3) Fu was not owed compensation for his work on the Chenery project because he had acted as an unlicensed contractor. However, on appeal, the district court found that "Fu did not provide general building contractor services for which a license was required and therefore Fu was entitled to the agreed share of profits under the contract between Yan and Fu." On December 12, 2007, the district court's judgment became final.
Thereafter, Yan engaged in a pattern of "ongoing, relentless, vexatious, and wholly meritless litigations against Fu and virtually anyone associated with Fu," including respondents. Most of these lawsuits were "bad faith attempts to relitigate issues" disposed of by the bankruptcy court with respect to "the various interests in and obligations with respect to the Chenery Project." In some cases, Yan was sanctioned and in some he was held in contempt. Eventually, the bankruptcy court determined that Yan was a vexatious litigant. Also, the Ninth Circuit awarded attorney fees to respondents for having to defend Yan's frivolous appeal. Yan was not deterred by these adverse outcomes.
According to the FAC, Yan continued to generate bad faith litigations against Fu and respondents by, among other things: (1) bringing meritless cases in the name of other plaintiffs, including his father; (2) using false evidence to file lis pendens against respondent Lei; (3) continuing to generate meritless claims after he became a licensed attorney; and (4) enlisting the assistance of his law partner when his law license was suspended. Respondents identified by case number a total of 12 lawsuits that Yan filed or instigated as part of his "pattern of ongoing, relentless, vexatious, and wholly meritless litigations."
In their cause of action for malicious prosecution, respondents further alleged on information and belief that Yan engaged in "a calculated plan to conduct perpetual attacks with bad faith lawsuits meant to destroy Plaintiffs and anyone associated with Plaintiffs." (Italics omitted.) He also assisted others in pursuing frivolous claims against Lei and others. He and his father acted as "alter egos" in pursuing their malicious plan.
In their cause of action for fraud, conspiracy to commit fraud and fraudulent transfers, respondents further alleged on information and belief that Yan has a "calculated exit plan to hide and transfer his assets and wealth," dating back to his sham bankruptcy filing and including recent claims that he is judgment proof. (Italics omitted.) He and his mother and father have engaged in a long standing conspiracy to defraud respondents and other creditors, by making fraudulent transfers and secreting away their assets. He has also used frivolous appeals as a delay tactic to avoid paying creditors.
C. Yan's Motion to Strike
In February 2016, Yan filed a motion to strike claims against him from the FAC pursuant to section 425.16. In that motion, Yan also moved to strike allegedly irrelevant portions of the FAC under Code of Civil Procedure section 435 (section 435). Yan made three basic arguments in support of his motion.
First, Yan moved to strike the malicious prosecution claim under section 425.16, subdivision (b)(1), which states: "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 under the United States Constitution or the California Constitution in connection with a public issue shall be subject to a special motion to strike, unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim."
Yan argued that the malicious prosecution claim involved protected petitioning activity and respondents could not demonstrate a probability of succeeding on the merits. According to Yan, the FAC identifies only two lawsuits filed by Yan that are not "time barred" by the two-year statute of limitations applicable to malicious prosecution. One of those cases (case No. CGC-12-522566) was still pending when the FAC was filed, and the other, a 2010 cross-complaint in case No. CGC-10-501321 (the 2010 cross-complaint), was not terminated favorably to respondents. Thus, Yan concluded that, as a matter of law, respondents could not prevail on the cause of action for malicious prosecution.
Second, Yan moved to strike the fraud claim under section 425.16, notwithstanding the fact that it did not implicate activity protected by the anti-SLAPP law. In conclusory fashion, Yan requested that the court strike the fraud claim because it was "wholly dependent" on the success of the malicious prosecution claim.
Third, Yan moved under section 435 to strike allegations pertaining to all of the prior cases he has filed except for his 2010 cross-complaint. Yan argued these other cases were irrelevant because they could not be used to prove malicious prosecution. He also argued that allegations pertaining to these cases were too general to satisfy the specificity requirements for alleging fraud.
Respondents opposed Yan's motion on the following grounds: First, the motion was procedurally improper because it was an untimely motion for reconsideration of the same arguments Yan had made in an earlier motion to strike the original complaint, which the court had denied. Second, the fraud claim could not be stricken under section 425.16 because it did not involve protected activity. Third, respondents had established a probability of prevailing on their malicious prosecution claim because (1) the statute of limitations was equitably tolled under the "continuing violation" doctrine; and (2) the one case that Yan conceded was not time-barred was terminated favorably to respondents.
D. The Trial Court's Order
On April 8, 2016, the court held a hearing on the motion to strike, at the conclusion of which it denied Yan's motion in its entirety, finding that "the portion of that motion that is under the Anti-SLAPP statute is frivolous, entitling the plaintiffs to attorneys' fees in opposing that portion of the motion." In reaching this ruling, the court made the following remark to Yan's trial counsel (who also represents Yan on appeal): "Your client is a serial filer of the same issues. That's got to stop. Any reasonable attorney, I now believe, would see that this was just the refiling of the same issue with no merit behind it." The court directed respondents' counsel to prepare an order, which it signed on April 28, 2016 (the April 28 order).
The April 28 order sets forth the following pertinent findings pertaining to the part of Yan's motion that was based on section 425.16: (1) the fraud cause of action does not involve activity protected by the anti-SLAPP statute; (2) the malicious prosecution claim does involve protected activity; and (3) respondents demonstrated a probability of prevailing on the merits of their malicious prosecution claim based on Yan's prosecution of his 2010 cross-complaint.
The April 28 order also states that the court denied Yan's section 435 motion to strike allegations about his other lawsuits because those allegations were not clearly irrelevant or prejudicial. In this regard, the court found lawsuits that, in and of themselves, could not be the basis of a malicious prosecution claim could be relevant to show malice or lack of probable cause.
Finally, the April 28 order authorizes respondents to recover attorney fees and costs under sections 128.5 and 425.16 as a sanction against Yan for filing a frivolous anti-SLAPP motion. Specifically, the court found that Yan's motion had already been presented and rejected by the judge who denied his special motion to strike these same causes of action from the original complaint. Furthermore, Yan had conceded that his cross-complaint against respondents was filed in 2010, within the statute of limitations period. Finally, Yan's contention that the cross-complaint was not terminated in respondents' favor was itself frivolous.
III. DISCUSSION
A. Issues on Appeal
Yan makes two claims in his opening brief. First, he contends the trial court committed legal error by refusing to strike the malicious prosecution claim under section 425.16. Resolving a section 425.16 motion involves two steps. "At the first step, the moving defendant bears the burden of identifying all allegations of protected activity, and the claims for relief supported by them. When relief is sought based on allegations of both protected and unprotected activity, the unprotected activity is disregarded at this stage. If the court determines that relief is sought based on allegations arising from activity protected by the statute, the second step is reached. There, the burden shifts to the plaintiff to demonstrate that each challenged claim based on protected activity is legally sufficient and factually substantiated. The court, without resolving evidentiary conflicts, must determine whether the plaintiff's showing, if accepted by the trier of fact, would be sufficient to sustain a favorable judgment. If not, the claim is stricken." (Baral, supra, 1 Cal.5th at p. 396.)
Yan's second claim is that even if his anti-SLAPP motion was properly denied, the court erred by awarding attorney fees to respondents under section 425.16, subdivision (c), which states, in part: "If the court finds that a special motion to strike is frivolous or is solely intended to cause unnecessary delay, the court shall award costs and reasonable attorney's fees to a plaintiff prevailing on the motion, pursuant to Section 128.5." Section 128.5 authorizes the court to "order a party, the party's attorney, or both, to pay the reasonable expenses, including attorney's fees, incurred by another party as a result of actions or tactics, made in bad faith, that are frivolous or solely intended to cause unnecessary delay."
In his reply brief, Yan attempts to assert a third claim—that his motion to strike should be granted as to all of his prior lawsuits other than his 2010 cross-complaint. Yan forfeited this claim for two independent reasons. First, he did not assert it in his opening brief. (See, e.g., In re Marriage of Khera & Sameer (2012) 206 Cal.App.4th 1467, 1477-1478.) Second, Yan's reply brief contains no factual or legal analysis challenging the denial of his section 435 motion. (See, e.g., Cahill v. San Diego Gas & Electric Co. (2011) 194 Cal.App.4th 939, 956.)
B. Malicious Prosecution
1. The Two-Step Test
In this case, there is no dispute that the malicious prosecution cause of action arises from protected activity. Section 425.16, subdivision (b)(1) expressly applies to a cause of action arising from an act "in furtherance of the person's right of petition or free speech." Filing a lawsuit is just such an act. (See Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1056 [" 'A cause of action "arising from" defendant's litigation activity may appropriately be the subject of a section 425.16 motion to strike.' [Citation.]"]; Navellier v. Sletten (2002) 29 Cal.4th 82, 90 ["The constitutional right of petition encompasses ' " 'the basic act of filing litigation.' " ' [Citation.]")
Accordingly, the burden shifted to respondents to demonstrate a likelihood of succeeding on the merits of this claim. When deciding whether a party has carried its burden under the second prong of the anti-SLAPP test, the court considers "the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based." (§ 425.16, subd. (b)(2).) "The evidence submitted by the plaintiff must be admissible [citation], and, if credited at trial, must support a judgment in his [or her] favor. [Citations.] Significantly, the trial court cannot and does not weigh the moving party's evidence against the opposing party's evidence, but addresses the factual and legal issues as in a motion for summary judgment. [Citation.] If the opposing party fails to make the requisite showing, the motion must be granted. [Citation.]" (Slaney v. Ranger Ins. Co. (2004) 115 Cal.App.4th 306, 318.)
As noted, the trial court found that respondents demonstrated a likelihood of succeeding on the merits of their malicious prosecution claim based on evidence pertaining to Yan's 2010 cross-complaint. "A malicious and meritless cross-complaint seeking affirmative relief, like a malicious and meritless complaint, is an 'action' that may support a malicious prosecution cause of action because "a cross-pleading creates an action distinct and separate from an initial pleading.' [Citation.]" (Nicholson v. Fazeli (2003) 113 Cal.App.4th 1091, 1098.) In light of our de novo standard of review, we preface or analysis with a brief summary of the record evidence pertaining to the 2010 cross-complaint.
2. Respondents' Evidence
In case No. CGC-10-501321, Fu filed a state court defamation action against Yan, which was based on statements Yan made in 2010. Yan responded by filing a cross-complaint against Fu, Chen, Suen, and respondents, alleging claims for emotional distress, breach of fiduciary duty, and fraud. Yan alleged in conclusory terms that these claims were based on conduct that occurred between 2000 and 2010. The defamation action was removed to bankruptcy court because Yan's chapter 7 case was still pending and the cross-complaint involved prepetition activity.
On February 22, 2011, the bankruptcy court granted respondents' motions to dismiss Yan's cross-complaint for failure to state a claim upon which relief could be granted. (Fed. Rules Civ. Proc., rule 12(b)(6).) The order was supported by findings of fact and law set forth in a 16-page memorandum that also resolved several other pending matters. Most notably, the court ruled that, once the bankruptcy case was closed, Yan would not be allowed to pursue prepetition claims that the trustee had abandoned. The court made this ruling to penalize Yan for filing a series of bad faith lawsuits during the pendency of his chapter 7 case in which he sought "to assert legal claims that have been previously adjudicated against him by this court, have been released by the trustee, or may be asserted only by the trustee."
In its February 2011 order and memorandum, the court also found that Yan's 2010 cross-complaint did not contain any material allegations with respect to conduct that occurred after Yan filed his bankruptcy petition. Furthermore, to the extent Yan's claims were based on prepetition activity, they had already been (1) resolved in the bankruptcy court judgment in the 2004 action; and/or (2) released by the trustee pursuant to court approved settlements with Lei, Chen, and Suen. Nevertheless, the court afforded Yan 10 days to amend his pleading to "specify with particularity" (italics omitted) how his claims involved post petition activity, as he had alleged. Instead of filing an amended cross-complaint, Yan filed a motion to amend the bankruptcy court's February 2011 order. That motion was denied and monetary sanctions were imposed on Yan.
In December 2013, the bankruptcy court issued an order determining Yan to be a vexatious litigant, after he filed a fifth action against Fu, Chen, Suen, and respondents alleging "pre-petition claims that were either previously rejected by a final order of [the bankruptcy] court or released by settlement agreements." The court's detailed order outlined Yan's history of filing improper actions, including the 2010 cross-complaint. The order reiterated that the claims in the cross-complaint arose from acts committed prior to the filing of Yan's bankruptcy petition; that the claims against respondents were dismissed because "those claims had been released by settlement agreements entered into with Trustee"; and that Yan was afforded the opportunity to amend his pleading to allege post-petition claims, but failed to do so.
In March 2014, the Ninth Circuit affirmed the dismissal of Yan's 2010 cross-complaint. The court also imposed sanctions on Yan for filing a frivolous appeal, finding that his "position in this appeal [was] wholly without merit."
3. Analysis
" 'To establish a cause of action for the malicious prosecution of a civil proceeding, a plaintiff must plead and prove that the prior action (1) was commenced by or at the direction of the defendant and was pursued to a legal termination in his, plaintiff's, favor [citations]; (2) was brought without probable cause [citations]; and (3) was initiated with malice [citations].' [Citation.]" (Nicholson v. Fazeli, supra, 113 Cal.App.4th at p. 1098.)
The evidence summarized above demonstrates that respondents are likely to prove that the 2010 cross-complaint was a malicious prosecution. That action was initiated by Yan against respondents and others, and was terminated favorably to respondents. It was brought without probable cause because, among other things, all of Yan's claims had already been resolved in earlier proceedings before the bankruptcy court. Furthermore, the 2010 cross-complaint was the latest in a series of bad faith cases that Yan had filed, thus evidencing malice.
Yan's sole contention with respect to the 2010 cross-complaint is that it was not terminated in respondents' favor. " ' "The theory underlying the requirement of favorable termination is that it tends to indicate the innocence of the accused, and coupled with the other elements of lack of probable cause and malice, establishes the tort [of malicious prosecution]." [Citation.] Thus, "[i]t is hornbook law that the plaintiff in a malicious prosecution action must plead and prove that the prior judicial proceeding of which he complains terminated in his favor." [Citation.]' [Citation.] [¶] To determine whether a party has received a favorable termination, we consider ' "the judgment as a whole in the prior action . . . ." [Citation.]' [Citation.] Victory following a trial on the merits is not required. Rather, ' "the termination must reflect the merits of the action and the plaintiff's innocence of the misconduct alleged in the lawsuit." [Citation.]' [Citation.]" (Siebel v. Mittlesteadt (2007) 41 Cal.4th 735, 741.)
According to Yan, the dismissal of his 2010 cross-complaint was nothing more than a procedural ruling that he lacked standing to assert prepetition claims owned by the bankruptcy estate. Therefore, Yan posits that the judgment was not on the merits or a finding that respondents were innocent of his charges. This argument is based on a patently unreasonable interpretation of the adverse orders entered against Yan in the bankruptcy proceeding.
When viewed as a whole, the judgment pertaining to the 2010 cross-complaint was a decision on the merits, reflective of the fact that respondents were innocent of the charges Yan made against them. The cross-complaint was dismissed because Yan attempted to relitigate claims that had already been resolved, primarily by the adverse judgment against him in the 2004 action, and secondarily by the settlement of claims made against his bankruptcy estate by respondent Lei and others. The judgment as a whole also demonstrates that, not for the first time, Yan manufactured false claims against respondents in order to relitigate his dispute with Fu over the Chenery Project.
C. Attorney Fees
Yan contends that even if the anti-SLAPP motion was properly denied, the trial court erred by finding that respondents were entitled to recover attorney fees under section 425.16, subdivision (c).
Preliminarily, we reject respondents' contention that this part of Yan's appeal should be summarily denied because Yan did not appeal from the separate order awarding them fees; provide an appellate record of evidence pertinent to the separate fee order; or establish that the court abused its discretion by calculating the amount of the fee award. Yan is not challenging an attorney fee award, but an order authorizing respondents to recover attorney fees under section 425.16, subdivision (c). That order was made at the hearing on the anti-SLAPP motion and incorporated into the April 28 order that is the subject of this appeal. Thus, the claim of error is properly before us, but we are not persuaded by it.
"The anti-SLAPP statute requires the trial court to award reasonable attorneys' fees to a prevailing plaintiff pursuant to section 128.5 when the court determines that a defendant's anti-SLAPP motion was 'frivolous or . . . solely intended to cause unnecessary delay.' (§ 425.16, subd. (c)(1) ["shall" award].) Frivolous in this context means that any reasonable attorney would agree the motion was totally devoid of merit. [Citation.] An order awarding attorneys' fees pursuant to section 128.5, as incorporated in section 425.16, subdivision (c), is reviewed under the abuse of discretion test. [Citation.] A ruling amounts to an abuse of discretion when it exceeds the bounds of reason, and the burden is on the party complaining to establish that discretion was abused. [Citation.]" (Gerbosi v. Gaims, Weil, West & Epstein, LLP (2011) 193 Cal.App.4th 435, 450.)
Yan contends that the trial court's finding that his anti-SLAPP motion lacked merit cannot be sustained because the record establishes the following: Yan was represented by counsel when the motion was filed; the arguments presented by Yan's trial counsel were "not unreasonable"; and there is no evidence that Yan's trial counsel was motivated by bad faith. These contentions by Yan's appellate attorney, who also represented him below, are not just conclusory, they ignore the substance of the trial court's ruling.
The trial court imposed this sanction on Yan because his special motion to strike the FAC advanced the same arguments that he made in his special motion to strike the original complaint. In that prior proceeding, the court denied Yan's motion and awarded respondents attorney fees as a sanction against Yan. Furthermore, the same month Yan's first motion to strike was denied, the superior court declared him to be a vexatious litigant, subjecting him to a prefiling order requirement. This, and other evidence demonstrated that Yan's motion to strike the FAC was yet another example of his long standing practice of attempting to relitigate issues that have already been decided against him. Under these circumstances, filing the present motion was a bad faith delay tactic, plain and simple.
D. Respondents' Additional Contentions
Respondents contend that the trial court should not have addressed the merits of Yan's anti-SLAPP motion because it was (1) untimely under section 425.16, subdivision (f); and (2) an invalid motion for reconsideration of the order denying Yan's special motion to strike the original complaint. These issues are not properly raised because the trial court rejected them and respondents did not file an appeal. (See, e.g., Estate of Powell (2000) 83 Cal.App.4th 1434, 1439.)
Respondents contend that Yan's liability for malicious prosecution is not limited to the 2010 cross-complaint but extends to all of the cases referenced in the FAC because the two-year statute of limitations was equitably tolled under the "continuing violation doctrine." (Citing, e.g., Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185, 1197-1198.) We do not address this issue because it is not necessary to our disposition. (See, e.g., Shaw v. County of Santa Cruz (2008) 170 Cal.App.4th 229, 259.) Furthermore, it appears that the trial court has yet to determine whether the continuing violation doctrine applies in this case.
Respondents argue that the one case referenced in the FAC that was still pending when the anti-SLAPP motion was decided, case No. CGC-12-522566, has now been resolved in their favor. As support for this argument, respondents filed a request for judicial notice, asking us to take notice of a recent Ninth Circuit opinion affirming the dismissal of Yan's complaint in case No. CGC-12-522566. We deny this request because the recently resolved case is not relevant to our review of the April 28 order. (See, e.g., Haworth v. Superior Court (2010) 50 Cal.4th 372, 379, fn. 2.)
Recently, respondents filed a second request for judicial notice in this case, asking us to take notice of a September 2017 decision by the State Bar Court of California in a disciplinary proceeding pertaining to Yan. Again, we deny respondents' request because the State Bar Court proceeding is not relevant to our review of the April 28 order. --------
Finally, respondents request that this court order Yan to pay their attorney fees on appeal as a sanction for filing a frivolous appeal. "A party seeking monetary sanctions for a frivolous or dilatory appeal . . . must serve and file a motion under the rules governing appellate motion procedure. [Citations.]" (Eisenberg et al., California Practice Guide: Civil Appeals and Writs, § 11:126 (2017); see e.g. Kajima Engineering & Const., Inc. v. Pacific Bell (2002) 103 Cal.App.4th 1397, 1402.) Furthermore, "California Rules of Court, rule 8.276(b)(1) provides that a motion for sanctions on appeal 'must include a declaration supporting the amount of any monetary sanction sought and must be served and filed before any order dismissing the appeal but no later than 10 days after the appellant's reply brief is due.' " (Saltonstall v. City of Sacramento (2014) 231 Cal.App.4th 837, 858-859.) By requesting sanctions in their appellate brief, respondents failed to comply with these requirements. (Cowan v. Krayzman (2011) 196 Cal.App.4th 907, 919 ["Sanctions cannot be sought in the respondent's brief."].) Therefore, the request for monetary sanctions is denied.
IV. DISPOSITION
The April 28, 2016 order is affirmed in its entirety. Respondents may recover costs on appeal.
/s/_________
RUVOLO, P. J. We concur: /s/_________
RIVERA, J. /s/_________
STREETER, J.