Opinion
B316698 B319336 B321783
01-24-2023
BRADFORD A. PHILLIPS, Plaintiff and Appellant, v. MARSANA DE MONSERAT, Defendant and Respondent.
Holmgren Johnson: Mitchell Madden, and Dennis M. Holmgren for Plaintiff and Appellant. Hill, Farrer &Burrill, William W. Steckbauer and Sean A. Topp, for Defendant and Respondent.
NOT TO BE PUBLISHED
APPEALS from a judgment and orders of the Superior Court of Los Angeles County, No. 21SMCV00158, Mark H. Epstein, Helen E. Zukin, Judges. Affirmed.
Holmgren Johnson: Mitchell Madden, and Dennis M. Holmgren for Plaintiff and Appellant.
Hill, Farrer &Burrill, William W. Steckbauer and Sean A. Topp, for Defendant and Respondent.
EDMON, P. J.
Plaintiff Bradford Phillips (Phillips) appeals from an order granting a special motion to strike (Code Civ. Proc., § 425.16) filed by defendant Marsana de Monserat (de Monserat), from an order granting attorney fees, and from the resulting judgment of dismissal. We find no error, and thus we will affirm.
All subsequent undesignated statutory references are to the Code of Civil Procedure.
FACTUAL AND PROCEDURAL BACKGROUND
I. Background.
De Monserat was a close friend of Gene Phillips (Gene), a Texas billionaire. After Gene's death in 2019, disputes arose between de Monserat and Phillips, Gene's oldest son and the executor of his estate, concerning real estate investments de Monserat allegedly made with, through, or at the direction of Gene and the entities he controlled.
In 2020, de Monserat retained an attorney, John Polzer, to assist her in her dealings with Gene's estate. On February 27, 2020, Polzer sent a letter to Phillips seeking information about de Monserat's investments, among other things. Because the February 27, 2020 letter (February 27 letter) is central to this litigation, we quote it in significant part:
"We are writing you in your individual capacity and in your capacity as Independent Executor of the Estate of Gene Phillips. We represent Marsana de Monserat in connection with dealings she had with your late father, Gene Phillips (the 'Decedent'). In reviewing the myriad of documents our client has provided to us, along with public records we have obtained, we have many questions about a variety of transactions, including transfers to our client by the Decedent or entities controlled by the Decedent, most or all of which appear to be gifts to our client. Those gifts, of course, would be reportable on the Form 706, United States Estate Tax Return, which, by our calculation is due this May, 2020, unless the due date is extended for an additional 6 months. We also have several questions about 'HUD loans' and the information provided, on behalf of our client, in connection with loan applications for loans obtained under the auspices of the U.S. Department of Housing and Urban Development.
"One such 'HUD loan' was apparently taken out in May, 2019, in connection with the refinancing of an apartment complex in Florida by FL Westwood, LLC, an entity owned by our client (via another entity), which happened in connection with a deal involving the purchase of real property in Parker County, Texas (the 'Weatherford Property'). Although our client contracted with entities controlled by the Decedent to purchase the Weatherford Property, it appears you unilaterally terminated that arrangement, without explanation, and still have not allowed her to purchase the Weatherford Property. Our client has explained to us that not only did you walk away from that deal, you misappropriated a substantial portion of the FL Westwood LLC's refinancing proceeds (the '2.6MM'), leaving our client with a highly leveraged company and no additional investment in real property.
"Since August, 2019, FL Westwood, LLC has ceased distributions. FL Westwood, LLC had been regularly distributing $22,500 a month before such cessation. We have asked for updates from the management company, Sunchase American LTD, which oversees the Florida real property owned by FL Westwood, LLC, but have received little if any response.
Recently, as you may be aware, Clarence Farmer has asked our client to sign engagement letters for 'HUD audits.' We are at a loss about many aspects of the HUD loans, applications for which were made at the Decedent's direction. For example, we have an internal memo you provided to our client on Saturday, February 1, 2020, which appears to explain that different federal entities, Freddie Mac and HUD, believe different parties to be the owner of FL Westwood, LLC and that our client is the owner '[f]or tax purposes.'
"It appears the Decedent ran a purposefully complex web of entities and oversaw the execution of many related-party transactions, to benefit himself or his friends. Our client would like to extricate herself from this web. We believe it would be more efficient to get answers from you directly, than to have to go to the various federal government agencies involved. We are looking for more information regarding (1) the Refinancing -what you did with the $2.6MM and when you will transfer it back to FL Westwood, LLC; (2) Gifts - explanations of which transfers by the Decedent or entities controlled by the Decedent were gifts; and (3) HUD Loans - what information was reported by the Decedent or entities owned or controlled by the Decedent in order to procure HUD loans and why different federal agencies believed different parties to be the owner of FL Westwood, LLC.
"We understand that our client had begun discussions with you about these topics and that you were to respond to her by Friday, February 14, 2020. As of the date of this letter, she has received no response from you. Please be advised that if we do not hear from you by Friday, March 6, 2020, we will be forced to pursue other remedies available to us, including but not limited to filing suit against you individually in connection with, among other things, your misappropriation of the $2.6MM, filing suit against Decedent's estate for fraudulent inducement involving various signatures he procured from our client, as well as seeking more information from the Department of Housing and Urban Development, the Federal Housing Association, and the Internal Revenue Service."
II. The present action.
In January 2021, Phillips, individually and in his capacity as the executor of Gene's estate, filed the present action against de Monserat for extortion and negligent and intentional infliction of emotional distress. The operative first amended complaint (FAC) alleges that prior to Gene's death, he was the advisor to a management company that ran three publicly-traded real estate investment companies. Gene and de Monserat were "social acquaintance[s]." In August 2019, after Gene's death, Phillips, in his capacity as executor, caused the estate to cease making unspecified payments of money to de Monserat. Thereafter, on February 27, 2020, de Monserat's attorney, Polzer, "sent a letter to [Phillips] in which he threatened action against [Phillips] individually and as the Executor of the Estate and demanded money from [Phillips] and the Estate. [Footnote omitted.] In that letter, De Monserat, through Mr. Polzer, made allegations of fraudulent activity by [Phillips], which would impute to the Estate. De Monserat, through Mr. Polzer, threatened to involve the Internal Revenue Service, the U.S. Department of Housing and Urban Development ('HUD'), and the Federal Housing Association. In the letter, Mr. Polzer also accused Plaintiff of misappropriating $2.6 [million] from a HUD-related project and threatened to involve HUD in the dispute."
The FAC alleges that in light of Phillips's position with "regulated insurance companies," the February 27 letter was "intentionally designed to cause significant emotional distress to [Phillips] so that [he] would cause the Estate to pay the monies demanded by De Monserat." Further, "[a]lthough De Monserat's allegations against [Phillips] and the Estate are unfounded," investigations by various governmental entities "would cause a significant disruption to [Phillips's] business activities" and "would likely lead to additional regulatory scrutiny." As a result, Phillips "was put in fear that criminal allegations would be made against him, his family, and the Estate," causing him significant emotional distress.
III. De Monserat's special motion to strike.
De Monserat filed a special motion to strike pursuant to section 425.16. The motion asserted that the FAC was based entirely on the February 27 letter, which was a "communicative act[] performed by [an] attorney [] as part of [his] representation of a client in a judicial proceeding or other petitioning context," and thus was protected by section 425.16. The motion further contended that the February 27 letter was not extortionary and, in any event, was not written or sent by de Monserat. Finally, the motion asserted that Phillips could not establish that he was likely to prevail on the merits of any of his claims, and thus urged that the FAC should be stricken in its entirety.
In support of the motion, de Monserat filed her own declaration, which stated as follows:
De Monserat met Gene in the mid-1990's, and they subsequently became close personal friends and worked together on a series of real estate ventures, beginning in the late 1990's. Over the next two decades, Gene continued to advise de Monserat with respect to real estate investments, both on her own and through entities Gene owned or controlled. De Monserat "trusted [Gene's] real estate advice implicitly," and she thus allowed Gene to maintain complete control over the management and operations of the various properties she owned and in which she invested.
In October 2015, de Monserat purchased an apartment complex in Florida, referred to as "FL Westwood," through a Nevada limited liability company, FL Westwood LLC. FL Westwood had a single member, NV West Coast Investments, LLC (NV West), of which de Monserat was the sole member. De Monserat allowed Gene to control the management and all dealings with regard to FL Westwood, just as she had done with her prior real estate investments. At Gene's direction, de Monserat engaged Sunchase American, LTD (Sunchase), a property management company, to manage the FL Westwood property. All notices pertaining to that property management agreement were to go to de Monserat's company at a Dallas address that housed Gene's numerous business entities.
In about November 2017, Gene located a property in Texas that he suggested de Monserat purchase by refinancing the FL Westwood property. In May 2019, at Gene's suggestion, FL Westwood obtained a loan from Greystone Funding Company, LLC, the proceeds of which were to be used as a down payment on the Texas property (the Weatherford property). The loan was insured by the Department of Housing and Urban Development (HUD). The refinance closed in May 2019, a few months before Gene's death. However, neither de Monserat nor her companies received the proceeds of the refinance. Instead, at Gene's direction, those funds were wired to an account controlled by Craig Landess, one of Gene's business associates. Those funds were not used to purchase the Texas property, and de Monserat never received an accounting of them.
Phillips took control of Gene's estate after his death. Phillips directed Sunchase to cease providing any distributions from FL Westwood to de Monserat and "froze [de Monserat] out" of other real estate ventures she had with Gene.
In about January 2020, de Monserat requested that Phillips provide her with an accounting of the properties she owned and the investments she had with Gene, but she received "little to no information." She then met in person with Phillips, who provided her with some documentation regarding her properties and investments that caused her to have further questions.
De Monserat retained attorney Polzer because she did not believe she was receiving accurate information from Phillips. On February 27, 2020, Polzer sent Phillips a letter seeking information about de Monserat's real estate investments with Gene and her ownership interest in FL Westwood. De Monserat "did not provide any input into the manner in which this letter was written," "did not suggest any language, phrases, or content be included within this letter," and "did not direct that this letter be written in the manner in which it was written or that it be sent."
Polzer's declaration in support of the special motion to strike said that the February 27 letter was prepared by Polzer's office and was approved and signed by him. The "sole purpose" of the letter was "to obtain information that [Polzer] deemed in [his] professional opinion to be necessary to represent [his] client's interests properly and fully." Further, he said:
"[T]here is nothing in the Letter that could possibly be construed as an attempt to extort anyone. The HUD insured loan to our client for which I was seeking information, was a loan to our client, or entities in which she had an interest, not Mr. Phillips or the Estate of Gene Phillips. [Gene] was involved in obtaining the loan on behalf of FL Westwood and I believed that the recipients of my Letter were in possession of the documents I was seeking. If they would not provide the information, I simply informed them that we would seek the information from our client's HUD lender. There was no threat and certainly no extortionate threat made or implied.
"With respect to the mention of seeking information from the IRS, [we] needed information related to the treatment of 'gifts' that we believed had been made to my client by [Gene] .... Moreover, the accountant, Clarence Farmer, who was then handling the tax returns of our client, was asking Ms. de Monserat to sign engagement letters for a HUD audit. We had no information regarding any HUD audit and my office was seeking information to justify such engagement by this accountant. All of the inquiries and requests in my Letter, were legitimate, necessary and in my professional judgment were clearly made in furtherance of my representation of our client's interests.
"The conclusion made in the Complaint that Ms. de Monserat directed me to send the Letter is not true. She gave no such direction and contributed no language to the Letter. The Letter was sent by me as part of my office's authorized representation of our client's interests and in seeking to obtain necessary and crucial information that we deemed necessary before deciding to file suit on behalf of our client and[,] if so, for what claims."
IV. Phillips's opposition to the special motion to strike.
Phillips opposed the special motion to strike. He asserted that although a special motion to strike protects the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances, where "the defendant concedes, or the evidence conclusively establishes, that the asserted protected speech or petition activity was illegal as a matter of law, the defendant is precluded from using the anti-SLAPP statute to strike the plaintiff's action." In the present case, "[a]lthough Mr. Polzer s[t]ates that he intends to seek information from HUD, the IRS, and the FHA, the implication is clear that, by involving the government in his efforts, it will lead to an investigation. This rises to the level of extortion as a matter of law."
In support of his opposition, Phillips filed a declaration in which he stated that he interpreted the February 27 letter as a threat "to involve the Internal Revenue Service, [HUD], and the Federal Housing Association relative to the allegations that de Monserat was making against me" and "to report me, the Estate, and the companies I run to HUD, the IRS, and FHA." Further, he said, "Although De Monserat's allegations against me and the Estate are unfounded, investigations by various governmental entities would cause a significant disruption to my business activities and the business activities of [my] insurance companies. I operate these businesses in a highly regulated industry. Such allegations, even if unfounded, would likely lead to additional regulatory scrutiny."
V. Order granting special motion to strike.
The trial court granted the special motion to strike. The court concluded, first, that the February 27 letter was not extortionary as a matter of law, and thus it was protected by section 425.16. The court explained: "[O]ne not unreasonable reading of the letter would be that it is only a demand for information and further discussions, leaving open the possibility that defendant could well be satisfied with the information obtained even without the payment of money. While that is, perhaps, a very generous reading of the letter, it is a fair reading of the letter.... The letter is a litigation letter, and as such, is protected by [section 425.16]." The court further concluded that Phillips had not demonstrated a probability of prevailing on his claims. It explained: "The [litigation] privilege provides immunity . . . [for] statements made during the course of litigation. . . . A pre-litigation communication [is protected if] . . . made to support litigation contemplated in good faith and under serious consideration. [Citation.] Here, [de Monserat] has put forth enough evidence for the Court to conclude that [she] was in fact contemplating litigation. There is no evidence from which the Court could conclude that the opposite is true: that [de Monserat] had no intention of suing [Phillips] and that the letter was no more than an idle threat. Because the statements in the letter were logically connected to litigation contemplated in good faith, [Phillips] will not be able to get past the privilege."
The trial court entered a written order granting the special motion to strike on September 20, 2021, and it entered a judgment of dismissal on April 11, 2022. Phillips timely appealed.
Phillips filed three separate notices of appeal--from the September 20, 2021 order granting the special motion to strike, the December 14, 2021 order granting attorney fees, and the April 11, 2022 order of dismissal--and he filed separate, identical appellant's opening briefs in each appeal. Phillips make no claims of error with regard to the award of attorney fees, and thus any such claim is forfeited. (E.g., In re Marriage of Falcone & Fyke (2008) 164 Cal.App.4th 814, 830 [absence of cogent legal argument or citation to authority forfeits the contention].)
DISCUSSION
Phillips contends the trial court erred by granting the special motion to strike because the February 27 letter was extortionary as a matter of law and he demonstrated a likelihood of prevailing on each of his causes of action. For the reasons that follow, these contentions lack merit.
I. Applicable law.
"Enacted by the Legislature in 1992, the anti-SLAPP statute is designed to protect defendants from meritless lawsuits that might chill the exercise of their rights to speak and petition on matters of public concern. (See § 425.16, subd. (a); Rand Resources, LLC v. City of Carson (2019) 6 Cal.5th 610, 619; Varian Medical Systems, Inc. v. Delfino (2005) 35 Cal.4th 180, 192.)" (Wilson v. Cable News Network, Inc. (2019) 7 Cal.5th 871, 883-884.) To that end, section 425.16, subdivision (b)(1) provides: "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."
The analysis of an anti-SLAPP motion involves two steps. "Initially, the moving defendant bears the burden of establishing that the challenged allegations or claims 'aris[e] from' protected activity in which the defendant has engaged." (Park v. Board of Trustees of California State University (2017) 2 Cal.5th 1057, 1061.) A claim arises from protected activity "when that activity underlies or forms the basis for the claim." (Id. at p. 1062.) If the defendant carries its burden to demonstrate that plaintiff's claims arise from protected activity, the plaintiff must then demonstrate its claims have at least" 'minimal merit.'" (Wilson v. Cable News Network, Inc., supra, 7 Cal.5th at p. 884.) To do so, "plaintiff must show the complaint is 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' . . ." '" (Taheri Law Group v. Evans (2008) 160 Cal.App.4th 482, 488.)
An order granting or denying a special motion to strike is appealable. (§ 425.16, subd. (i); § 904.1, subd. (a)(13).) Our review is de novo. (Park v. Board of Trustees of California State University, supra, 2 Cal.5th at p. 1067.)
II. Each cause of action of the complaint arises out of protected activity.
It is undisputed that each of the three causes of action alleged in the FAC arose out of the February 27 letter written by Polzer in his capacity as de Monserat's attorney. Phillips contends that the February 27 letter, although a writing, is not constitutionally protected because it is extortionary as a matter of law. As we discuss, Phillips's contention lacks merit.
A. The criminal extortion exception to section 425.16.
In Flatley v. Mauro (2006) 39 Cal.4th 299 (Flatley), our Supreme Court carved out an exception to section 425.16 for speech or petitioning activity that is illegal as a matter of law. That case concerned an allegation by Mauro's client, Robinson, that Flatley had raped her. Mauro sent a letter to Flatley, followed by several phone calls, in which he threatened to file an action against Flatley, to report him to federal and local authorities, and to destroy his career unless Flatley made a settlement payment in excess of $1 million. Flatley sued Mauro for civil extortion and intentional infliction of emotional distress, among other things, and Mauro filed a special motion to strike, urging that the letter was a prelitigation settlement offer. The trial court denied the motion, concluding that extortionary speech is not constitutionally protected, and the Court of Appeal affirmed. (Id. at pp. 305-309.)
The Supreme Court affirmed. It noted that the purpose of section 425.16 is to protect the chilling of" 'the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances' by 'the abuse of the judicial process.'" (Flatley, supra, 39 Cal.4th at p. 313.) As a necessary corollary, the court said, "because not all speech or petition activity is constitutionally protected, not all speech or petition activity is protected by section 425.16." (Ibid.) Accordingly, "where either the defendant concedes the illegality of its conduct or the illegality is conclusively shown by the evidence, [a special motion to strike] must be denied.... If, however, a factual dispute exists about the legitimacy of the defendant's conduct, it cannot be resolved within the first step but must be raised by the plaintiff in connection with the plaintiff's burden to show a probability of prevailing on the merits." (Id. at p. 316.)
As relevant to the case before it, the court explained that under California law," 'Extortion is the obtaining of property from another, with his consent . . . induced by a wrongful use of force or fear....' (Pen. Code, § 518.) Fear, for purposes of extortion, 'may be induced by a threat, either: [¶] . . . [¶] 2. To accuse the individual threatened . . . of any crime; or, [¶] 3. To expose, or impute to him . . . any deformity, disgrace, or crime[.]' (Pen. Code, § 519.) 'Every person who, with intent to extort any money or other property from another, sends or delivers to any person any letter or other writing, whether subscribed or not, expressing or implying, or adapted to imply, any threat such as is specified in Section 519, is punishable in the same manner as if such money or property were actually obtained by means of such threat.' (Pen. Code, § 523.)" (Flatley, supra, 39 Cal.4th at p. 326.)
The court noted that a demand for money may be extortionary even if the underlying threats are not themselves illegal. It explained:" '[I]n many blackmail cases the threat is to do something in itself perfectly legal, but that threat nevertheless becomes illegal when coupled with a demand for money.' [Citation.] . . . 'It is the means employed [to obtain the property of another] which the law denounces, and though the purpose may be to collect a just indebtedness arising from and created by the criminal act for which the threat is to prosecute the wrongdoer, it is nevertheless within the statutory inhibition. The law does not contemplate the use of criminal process as a means of collecting a debt.' [Citations.])" (Flatley, supra, 39 Cal.4th at p. 326.)
Applying these principles, the court concluded that Mauro's letter and phone calls to Flatley constituted extortion as a matter of law. It explained: "At the core of Mauro's letter are threats to publicly accuse Flatley of rape and to report and publicly accuse him of other unspecified violations of various laws unless he 'settled' by paying a sum of money to Robertson of which Mauro would receive 40 percent. In his follow-up phone calls, Mauro named the price of his and Robertson's silence as 'seven figures' or, at minimum, $1 million. The key passage in Mauro's letter is at page 3 where Flatley is warned that, unless he settles, 'an indepth investigation' will be conducted into his personal assets to determine punitive damages and this information will then 'BECOME A MATTER OF PUBLIC RECORD, AS IT MUST BE FILED WITH THE COURT .... [¶] Any and all information, including Immigration, Social Security Issuances and Use, and IRS and various State Tax Levies and information will be exposed. We are positive the media worldwide will enjoy what they find.'" (Flatley, supra, 39 Cal.4th at p. 329, boldface omitted.) In a subsequent telephone call, Mauro gave Flatley a deadline of the end of the month to offer sufficient payment, "apparently without any further discussion of the particulars of Robertson's claim." (Ibid.) Taken together, the court said, the letter and phone call constituted criminal extortion as a matter of law because they threatened to" 'accuse'" Flatley of, or" 'impute to him,'" " 'crime[s]'" and" 'disgrace'" (Pen. Code, § 519, subds. 2, 3) unless he paid Mauro a minimum of $1 million. (Flatley, at p. 330.) Further, the threat to disclose criminal activity entirely unrelated to any alleged injury suffered by Mauro's client"' exceeded the limits of respondent's representation of his client' and is itself evidence of extortion." (Id. at pp. 330-331.) Accordingly, because Flatley's action arose out of conduct that was extortionary as a matter of law, it was not constitutionally protected, and thus the trial court properly denied Mauro's special motion to strike. (Id. at p. 333.)
The court noted that "any doubt" as to the extortionate character of the letter was dispelled by the accounts of Mauro's telephone calls to Flatley's attorneys within a week of having sent the letter, in which Mauro "did not discuss the particulars of the claim or express an interest in negotiations but simply stated a deadline for Flatley 'to offer sufficient payment,'" thus demonstrating "that it was never his intention to engage in settlement negotiations. Instead, the insistent theme of his conversations with Flatley's lawyers is the immediate and extensive threat of exposure if Flatley failed to make a sufficient offer of money." (Flatley, supra, 39 Cal.4th at p. 332.)
In subsequent cases applying Flatley's exception for communications that are extortionary as a matter of law, courts have looked carefully at the communications at issue, and specifically to whether those communications threatened to accuse another party of a crime or to expose the party to public disgrace if a payment was not made. In Mendoza v. Hamzeh (2013) 215 Cal.App.4th 799, 802, for example, the court held that a letter threatening to file a civil action against the plaintiff and to "report[] him to the California Attorney General, the Los Angeles District Attorney, the Internal Revenue Service regarding tax fraud, the Better Business Bureau, [and] customers and vendors" if payment was not made was not constitutionally protected speech or petitioning activity. The court explained: "Regardless of whether [plaintiff] committed any crime or wrongdoing or owed [defendant's client] money, [defendant's] threat to report criminal conduct to enforcement agencies and to [plaintiff's] customers and vendors, coupled with a demand for money, constitutes 'criminal extortion as a matter of law,' as articulated in Flatley." (Id. at p. 806.) The court similarly concluded in Falcon Brands, Inc. v. Mousavi &Lee, LLP (2022) 74 Cal.App.5th 506, where in connection with a $491,000 settlement demand, an attorney accused a cannabis supplier of wrongfully terminating the attorney's client, violating Bureau of Cannabis Control requirements, and bribing a deputy district attorney. The attorney further threatened to disclose these claims to the supplier's merger partner. (Id. at pp. 512-513.) Days later, the attorney advised the cannabis supplier that she had put the merger partner on notice of her client's wage claims "without disclosing other issues mentioned in my [prior letter]," but planned to make a full disclosure shortly. (Id. at p. 514, italics omitted.) The court concluded that, considered together, these communications were extortionary as a matter of law: "As the trial court noted, the evidence made clear that [the attorney] expressly linked her next potential communication with [the merger partner]-which she knew would inevitably reveal her accusations of criminal misconduct against [the supplier]-to [the supplier's] failure to meet her settlement demand. This was extortion: 'obtaining of property . . . from another . . . induced by a wrongful use of force or fear.' (Pen. Code, § 518, subd. (a).)" (Id. at p. 522.)
In contrast, in Malin v. Singer (2013) 217 Cal.App.4th 1283, 1289, 1299, the court held that an attorney's threat to "file [a] Complaint against [Malin and others] unless this matter is resolved to my client's satisfaction" was not extortionary because it "made no overt threat to report Malin to prosecuting agencies or the Internal Revenue Service." Similarly, in Flickinger v. Finwall (2022) 85 Cal.App.5th 822, 829, 833, the court held that an attorney's statement that his client would "aggressively defend himself" if sued was not extortionary as a matter of law, even when coupled with the suggestion that opposing counsel should ask his client" 'how such litigation may result in [a third party] opening an investigation into [plaintiff's] relationship with vendors.'" The court explained that this statement was "not a threat that [defendant] would report plaintiff to prosecuting authorities, and it does not lie so far outside the bounds of professional communication to amount to criminal extortion as a matter of law." (Id. at p. 837.)
Taken together, these cases stand for the proposition that a writing is extortionary as a matter of law if it both demands payment from the plaintiff and either threatens to report the plaintiff to prosecuting authorities if payment is not made or threatens to reveal alleged criminal activity to a third party who could damage the plaintiff. In contrast, if a writing does not tie a demand for payment to a threat to report the plaintiff to prosecuting authorities-or if "a factual dispute exists about the legitimacy of the defendant's conduct" (Flatley, supra, 39 Cal.4th at p. 316)-the writing is not extortionary as a matter of law. With that framework in mind, we turn to the facts of the present case.
B. The February 27 letter does not constitute extortion as a matter of law.
Phillips contends that the February 27 letter is extortionary as a matter of law because it accused him of criminal activity, threatened to report him to various federal agencies, and demanded money. Thus, he urges, because each of the three causes of action alleged in the FAC is based on the February 27 letter, none is the proper subject of a special motion to strike. For the reasons that follow, we disagree.
Phillips contends that the trial court made an error of law because it "fashioned its own test for extortion," which "misread the prevailing law in several ways." We do not reach this issue. Because our review is independent, the trial court's reasoning, mistaken or not, is irrelevant to our analysis. (Coral Construction, Inc. v. City and County of San Francisco (2010) 50 Cal.4th 315, 336 [" '[i]t is axiomatic that we review the trial court's rulings and not its reasoning' "].)
First, Phillips contends that the statement in the letter that Gene's transfers to de Monserat "would be reportable on the Form 706, United States Estate Tax Return" constituted an accusation that the estate was "committing tax fraud by either failing to file the required returns or incorrectly classifying the payments to her." We do not agree that this is the only-or the most logical-interpretation of counsel's reference to gift taxes. Of note, the reference to tax returns follows Polzer's statement that having reviewed documents provided him by his client, he has "questions about a variety of transactions, including transfers to our client by [Gene] or entities controlled by [Gene], most or all of which appear to be gifts to our client." While the donor generally is responsible for paying a gift tax, the donee is secondarily responsible for the tax in the event the donor fails to pay. (26 U.S.C. § 6324(b); Weeden's Estate v. C. I. R. (9th Cir. 1982) 685 F.2d 1160, 1162, fn. 3.) Further, if Gene's payments to de Monserat were income, not gifts, de Monserat would have been required to report them on her own tax returns. Understanding the nature of the transfers from Gene to de Monserat, therefore, was essential to evaluating de Monserat's own tax liability. And, because the relevant tax forms were not due until May 2020-that is, until several months after the letter was sent-we fail to see how the statement could be interpreted as an accusation that Phillips had committed tax fraud.
Second, Phillips contends that the statement that Polzer "ha[d] several questions about the 'HUD loans' and the information provided, on behalf of our client, in connection with loan applications for loans obtained under the auspices of the U.S. Department of Housing and Urban Development" constituted an "allegation" that Phillips or the estate "defrauded HUD with respect to the loans in which De Monserat was involved." Again, other portions of the letter provide necessary context: The following paragraph says that one such HUD loan had apparently been taken out by an entity owned by de Monserat-not by Phillips or the estate-and may currently have been under audit by HUD. The most reasonable understanding of the relevant language, therefore, is that de Monserat was concerned about her own potential liability and was seeking information relevant to a possible HUD audit. Although there are other possible interpretations, an extortionary one is not compelled as a matter of law.
Third, Phillips contends that the letter's assertions that the estate "walked away from the [Weatherford Property] deal" and "misappropriated a substantial portion of the FL Westwood LLC's refinancing proceeds" constitute "an allegation of fraud and embezzlement, both of which are crimes." Fraud and embezzlement can, in some circumstances, constitute crimes, but the February 27 letter does not accuse Phillips or the estate of the commission of a crime or threaten to report Phillips to any prosecuting authorities. Instead, the letter references only the filing of a civil action in the context of the refinancing proceeds, advising that if Phillips does not respond by March 6, 2020, de Monserat will "be forced to pursue other remedies available to [her]," including "filing suit against you individually in connection with, among other things, your misappropriation of the $2.6MM." (Italics added.) The threat to file a civil action is, manifestly, not a threat of criminal prosecution, and thus we cannot conclude that the statement that Phillips had misappropriated refinancing proceeds constituted a threat to accuse him of a crime within the meaning of the criminal extortion statutes.
Fourth, Phillips highlights the letter's request for more information concerning what "was reported by the Decedent or entities owned or controlled by the Decedent in order to procure HUD loans and why different federal agencies believed different parties to be the owner of FL Westwood, LLC." According to Phillips, this request for information is extortionary because it constitutes an "allegation that [Phillips] and/or the Estate defrauded HUD with respect to the loans in which De Monserat was involved." Again, we do not agree that this is the only-or the most logical-interpretation of counsel's reference to HUD loans. As noted above, the HUD loans to which the letter refers appear to have been taken out by de Monserat, albeit at Gene's "direction." On its face, therefore, the letter's request for more information about HUD loans appears to express concern about de Monserat's possible misstatements to federal agencies, not Gene's or the estate's.
Finally, Phillips points to the February 27 letter's statement that if information is not received from Phillips, de Monserat may seek more information from HUD, the Federal Housing Association, and the IRS. According to Phillips, this statement "is an implied threat of making a criminal complaint" because "[i]n complicated transactions such as the ones between De Monserat and the late Gene Phillips," questions "can be more powerful than criminal complaints made by citizens." Perhaps so-but neither the nature of the transactions nor the likely effect of posing questions to the IRS or HUD is plain on the face of the letter itself. In any event, the letter does not say that Polzer will inquire of federal agencies unless Phillips pays money to de Monserat; instead, it says such inquiries will become necessary if Phillips fails to provide the information de Monserat sought.
For the foregoing reasons, we agree with the trial court that the February 27 letter is not extortionary as a matter of law. Accordingly, because Phillips" 'cannot demonstrate as a matter of law that [de Monserat's] acts do not fall under section 425.16's protection, then the claimed illegitimacy of [de Monserat's] acts is an issue which [Phillips] must raise and support in the context of the discharge of [his] burden to provide a prima facie showing of the merits of [his] case.'" (See Flatley, supra, 39 Cal.4th at p. 315.) We turn now to that issue.
III. Phillips has not demonstrated a likelihood of prevailing on the merits of his causes of action.
The trial court concluded that Phillips could not demonstrate a likelihood of prevailing on any of his causes of action because each was barred by the litigation privilege. On appeal, Phillips urges this was error because the February 27 letter did not concern litigation contemplated in good faith. We disagree.
In his reply brief, Phillips asserts that it was de Monserat's burden to demonstrate that the litigation privilege applied. Not so. The litigation privilege is relevant to the second prong of section 425.16 (Flatley, supra, 39 Cal.4th at p. 323), on which Phillips, not de Monserat, bore the burden of proof. (E.g., Mendoza v. Hamzeh, supra, 215 Cal.App.4th at p. 804 [once defendant makes threshold showing that challenged cause of action arises from protected activity, burden shifts to plaintiff to demonstrate the probability of prevailing on the claim]; Taheri Law Group v. Evans, supra, 160 Cal.App.4th at p. 488 [same].) Cohen v. Brown (2009) 173 Cal.App.4th 302, on which Phillips relies, does not hold to the contrary. The sentence Phillips quotes does not discuss the parties' respective burdens of proof and, in any event, is clearly dicta. (Id. at p. 319 ["[defendant] has claimed that . . . Civil Code section 47 . . . protect[s] him from plaintiff's claims. As we have explained, however, that is not an issue in this case because the burden never shifted to plaintiff to demonstrate a probability of prevailing on his causes of action"], italics added.)
"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.' [Citation.] '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.' [Citation.] The privilege 'is not limited to statements made during a trial or other proceedings, but may extend to steps taken prior thereto, or afterwards.'" (Action Apartment Assn., Inc. v. City of Santa Monica (2007) 41 Cal.4th 1232, 1241.)
" 'The requirement of good faith contemplation and serious consideration provides some assurance that the communication has some"' "connection or logical relation" '" to a contemplated action and is made"' "to achieve the objects" '" of the litigation. [Citation.] "Whether a prelitigation communication relates to litigation that is contemplated in good faith and under serious consideration is an issue of fact."' [Citation.]" (Flickinger v. Finwall, supra, 85 Cal.App.5th 822, 840.)
Section 47, subdivision (b) encompasses not only testimony in court and statements made in pleadings, "but also statements made prior to the filing of a lawsuit, whether in preparation for anticipated litigation or to investigate the feasibility of filing a lawsuit." (Hagberg v. California Federal Bank FSB (2004) 32 Cal.4th 350, 361, italics added.) In Rubin v. Green (1993) 4 Cal.4th 1187, for example, our Supreme Court held that the litigation privilege barred a claim for unlawful attorney solicitation. The court explained: "[P]laintiff's claims, however styled, are founded essentially upon alleged misrepresentations made by [a law firm] to [mobile home park] residents in the course of discussions over park conditions and the possibility of being retained to prosecute the failure-to-maintain action.... Whether these acts amounted to wrongful attorney solicitation or not, they were communicative in their essential nature and therefore within the privilege of section 47(b)." (Id. at p. 1196, italics added.)
In support of his contention that the letter was not sent in anticipation of litigation, Phillips quotes from an unpublished opinion, Berryhill v. Burton (Nov. 5, 2015, B260683) [nonpub. opn.]. The California Rules of Court clearly state that, except in circumstances not present here, unpublished opinions "must not be cited or relied on by a court or a party." (Cal. Rules Court, rule 8.1115(a), italics added.) We therefore will not consider Berryhill, and we admonish Phillips and his counsel not to include citations to unpublished cases in any future litigation.
In the present case, the February 27 letter appears, on its face, to relate to contemplated litigation: As noted above, the letter states that if Phillips failed to provide the requested information, de Monserat would "be forced to pursue other remedies," including "filing suit against" Phillips and the estate. Polzer's declaration is further evidence that the February 27 letter related to litigation "contemplated in good faith and under serious consideration": According to Polzer, the letter "was sent by me as part of my office's authorized representation of our client's interests and in seeking to obtain necessary and crucial information that we deemed necessary before deciding to file suit on behalf of our client and[,] if so, for what claims." And, contrary to his contention on appeal, Phillips failed to establish a prima facie case that de Monserat was not considering litigation-indeed, Phillips's declaration is silent on this issue.
For all of these reasons, the trial court correctly concluded that Phillips failed to demonstrate by prima facie evidence that the February 27 letter was not subject to the litigation privilege. Accordingly, there was no reasonable probability that Phillips would prevail on any of his causes of action (see MMM Holdings, Inc. v. Reich (2018) 21 Cal.App.5th 167, 183 ["A plaintiff cannot establish a probability of prevailing if the litigation privilege precludes the defendant's liability on the claim"]), and thus the trial court properly granted the special motion to strike.
DISPOSITION
The judgment, as well as the orders granting the special motion to strike and the motion for attorney fees, are affirmed. De Monserat is awarded her appellate costs.
We concur: LAVIN, J. EGERTON, J.