Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_05-cv-00291/USCOURTS-caed-1_05-cv-00291-5/pdf.json

Nature of Suit Code: 370
Nature of Suit: Other Fraud
Cause of Action: 18:1962 Racketeering (RICO) Act

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

JOE FLORES, an individual; and

CONNIE FLORES, an individual, 

 Plaintiffs,

v. 

EMERICH & FIKE, a professional

corporation, et al.

 Defendants.

1:05-CV-0291 OWW DLB

ORDER GRANTING MOTION TO

STRIKE (DOC. 34) AND MOTION

TO DISMISS (DOC. 33/35).

I. INTRODUCTION

This is the third case filed by Joe and Connie Flores

(“Plaintiffs”) concerning a series of packing and marketing

agreements entered into between Plaintiffs and DDJ, Inc., DDJ

LLC, and related entities and individuals. DDJ, Inc., and DDJ

LLC filed for Chapter 7 Bankruptcy Protection on January 3, 2005. 

Shortly thereafter, on March 1, 2005, Plaintiffs filed the

instant complaint (Flores III), naming as defendants a number of

individuals involved with DDJ and affiliated corporate entities

(the “DDJ Defendants”). The Flores III complaint also names as

defendants the law firm of Emerich & Fike and several individual

attorneys at that firm (collectively, the “Fike Defendants”) who

represent many of the DDJ Defendants. 

The Fike Defendants move to dismiss and/or strike all of the

claims against them. Specifically, the Fike Defendants move to

dismiss the eighth cause of action (civil RICO) and to strike the

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second (malicious prosecution), third (abuse of process), fourth

(violation of the uniform fraudulent transfer act), seventh

(conversion), ninth (negligent interference with contract), tenth

(conspiracy), and eleventh (invasion of privacy/defamation)

causes of action.

II. PROCEDURAL HISTORY

Plaintiffs’ filed their initial complaint against DDJ, Inc.,

DDJ LLC, and others in 1999, asserting claims under the

Perishable Agricultural Commodities Act (“PACA”), along with

state law contract and tort claims. See Flores et al v. DDJ,

Inc., et al., 1:99-cv-5878 AWI DLB (“Flores I”). In 2003, a jury

found for the Flores’ on all claims against DDJ Inc. and DDJ LLC

(“the Judgment Debtors”). 

On October 15, 2004, the Flores’ filed a second lawsuit,

alleging that individual officers of the Judgment Debtors

fraudulently transferred assets from the Judgment Debtors into

their own names. See In Re Joe Flores, et a. v. Dennis Hagobian,

et al., 1:04-cv-6405 OWW DLB (“Flores II”).

On January 3, 2005, DDJ, Inc. and DDJ, LLC filed for Chapter

7 bankruptcy protection. Further proceedings in Flores I were

stayed pursuant to the automatic stay provision of the Bankruptcy

Code. Flores I, Doc. 408 at 2. Similarly, Flores II has been

stayed pending notice of whether the bankruptcy trustees will

authorize the case to proceed and whether the stay should be

lifted for that case. (Flores II, Doc. 19 at 3.) 

Shortly after the bankruptcy filing, the Flores’ filed the

141-page complaint in this case (“Flores III”). The third

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complaint alleges various forms of alter ego liability,

fraudulent transfers, and the existence of a racketeering

enterprise. (Doc. 1 (“Compl.”), filed Mar. 1, 2005.) Flores III

names as defendants many of the individual and corporate

defendants named in Flores I and Flores II, although the Judgment

Debtors (DDJ Inc. and DDJ LLC) are not named. The new complaint

names as defendants: Emerich & Fike, a law firm that represented

DDJ Inc. and DDJ LLC in Flores I, and a number of individual

lawyers who practice at Fike (the “Fike Defendants”). Plaintiffs

request damages, injunctive relief, and attorney’s fees. 

On May 10, 2005, counsel for DDJ Inc. and DDJ LLC filed a

“notice of filing bankruptcy” in this case, asserting that these

proceedings also are subject to the automatic stay because the

pending claims concern property belonging to the debtors’ estate. 

The district court determined that the automatic stay applied to

some of the defendants, but requested further briefing on the

applicability of the stay to the remaining defendants. (Doc.

72.)

The Chapter 7 Bankruptcy Trustee then submitted a report

indicating that the Trustee does not intend to pursue any of the

claims against the Fike Defendants and consented to an order

vacating the stay. The district court vacated the stay and set

the Fike Defendants’ previously-filed motions to dismiss and to

strike for hearing. 

 Oral argument on these motions was heard December 12, 2005.

On February 3, 2006, the related adversary bankruptcy proceeding

in Enoch Packing Inc., Joe Flores and Connie Flores v. DDJ Inc,

et al., James Salvan Trustee, Case No. 02-17736-A-7, was

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dismissed without leave to amend. (Docs 105 & 106.) The Flores’

moved for reconsideration before the bankruptcy court. (Doc.

107, dated Feb. 9, 2006.)

III. FACTUAL BACKGROUND

Joe and Connie Flores are apple growers based in Visalia,

California. In September 1995, the Flores’ entered into a

packing and marketing agreement with Fruit Marketing, Inc. (FMI),

now known as DDJ Inc. During this relationship, FMI advanced the

Flores’ money in exchange for a security interest in the Flores’

apple crops. The terms of the loan are set forth in a promissory

note signed by Joe Flores. 

In or around early 1998, the Flores began to suspect that

FMI was using improper accounting practices to calculate the

amount due to the Flores’ under the packing and marketing

contract. In April 1998, the Flores demanded access to all of

FMI’s documents related to the handling and selling of the

Flores’ 1997 and 1998 apple crops. Throughout the remainder of

1998, the parties disputed the extent to which the Flores’ were

entitled to access these documents and whether the Flores would

need to pay $0.53 per page for copies of the documents. 

At some point in mid-1998, the Flores entered into a packing

and marketing agreement with a different fruit packer, Hemphill &

Wilson enterprises (“H&W”). On October 16, 1998, the Fike

Defendants, on behalf of their client FMI, sent a letter to H&W,

informing H&W that FMI had a secured interest in the proceeds

from the Flores’ 1998 apple crop. On October 26, a

representative from H&W informed the Flores that H&W would not

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perform the contract under such circumstances. On October 27,

the Fike Defendants sent a letter to the Flores’ formally

demanding payment of the amount due under the note. Throughout

this entire period, the Flores’ were still engaged in a dispute

with FMI, represented by the Fike Defendants, over how much the

Flores would pay to obtain copies of FMI’s documents.

On April 27, 1999, an attorney filed a complaint on behalf

of the Flores, naming DDJ and related entities and individuals as

defendants. Flores, et al., v. DDJ Inc., et al., 1:99-cv-5878.

Disputes over access to documents from FMI’s files continued

throughout 1999 and 2000. Eventually, the Flores’ received a

large number of documents from FMI. However, the Flores’ now

assert that these documents had been “sanitized,” by one of the

DDJ Defendants, Dennis Hagobian, who was seen “shredding

documents from sales jackets for many days.” (See J. Flores

Decl. at ¶58.) The evidence of document destruction was known to

the Flores’ during the Flores I trial. 

On July 31, 1999, DDJ sold most of its property to Norman

Trainer and his partner Steven Taft (“Trainer and Taft”). Among

the assets transferred to Trainer and Taft was the Flores’

promissory note. As part of the transaction, DDJ and Trainer and

Taft entered into an agreement whereby DDJ agreed to defend

against the Flores’ lawsuit and pursue the counterclaim on behalf

of Trainer and Taft. 

The Fike Defendants filed a cross-complaint against the

Flores on behalf of DDJ, alleging breach of contract and seeking

payment on the promissory note. The Flores later challenged

DDJ’s standing to bring the counterclaim on behalf of Trainer and

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Many of these causes of action are subdivided into 1

numerous separate “claims.”

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Taft. Judge Ishii allowed the claim to go forward. 

A jury trial commenced in July 2003. On July 25, a jury

returned a special verdict, finding for plaintiffs on all causes

of action alleged against DDJ and finding for the Flores’ on the

counterclaims. The jury determined that the Flores’ were

entitled to damages. 

On October 15, 2004, the Flores’ filed a second lawsuit,

alleging that individual officers of the Judgment Debtors

fraudulently transferred assets from the Judgment Debtors into

their own names. See In Re Joe Flores, et al. v. Dennis

Hagobian, et al., 1:04-cv-6405 (“Flores II”).

On January 3, 2005, DDJ, Inc. and DDJ, LLC filed for Chapter

7 bankruptcy protection.

IV. ALLEGATIONS IN FLORES III

Plaintiffs’ complaint, which is 142 pages long, presents the

following eleven “causes of action.” 

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1. Alter ego liability. (Compl. at 26.)

2. Malicious prosecution. (Id. at 46.)

3. Malicious use of process, spoilation of evidence, and

fraudulent concealment of evidence. (Id. at 51.)

4. Violation of the Uniform Fraudulent Transfer Act [Civil

Code § 3439 et seq.]. (Id. at 60.)

5. Violation of 7 U.S.C. §§ 499(b)(1), (2) & (4); PACA §§

2(2) &(5); 21 U.S.C. §§ 331(a), (b), (c) & (k). (Id.

at 84.)

6. Fraud, Deceit, Intentional and Negligent Fraud, and

Constructive Fraud and Breach of Fiduciary Duty. (Id.

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at 86.)

7. Conversion. ((Id. at 89.)

8. Civil Racketeering in violation of 18 U.S.C. § 1961. 

9. Negligent interference with or procurement of a breach

of contract. (Id. at 124.) 

10. Conspiracy to defraud and commit various other offenses

against Plaintiff’s business interests. (Id. at 127.) 

11. Invasion of privacy. (Id. at 132.) 

Although the complaint in this case is detailed and very lengthy,

only a few factual allegations are directed at the Fike

Defendants. Specifically, the Complaint alleges that the Fike

Defendants:

(1) Prosecuted the cross-complaint in Flores I without

probable cause as to both Joe Flores and Connie Flores.

(2) Attempted to charge Joe Flores $0.53 per page to copy

documents prior to the commencement of litigation in

Flores I. 

(3) Sent correspondence to H&W, the Flores’ new marketing

agent, notifying H&W that FMI had a secured interest in

the Flores’ 1998 apple crop based on an outstanding

debt allegedly owed to FMI by the Flores’.

(4) Failed to produce documents in discovery that Fike

defendants later attempted to use at trial. 

(5) Destroyed relevant documents (or at least conspired to

destroy them). 

(5) Maintained the underlying action in a manner to buy the

DDJ Defendants additional time to defraud their

creditors.

(6) The DDJ Defendants’ alleged fraudulent transfers were

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used to pay the Fike defendant’s legal fees. 

V. STANDARD OF REVIEW

A. Motion to Strike.

The Fike Defendants move to strike the second (malicious

prosecution), third (abuse of process), fourth (violation of the

uniform fraudulent transfer act), seventh (conversion), ninth

(negligent interference with contract), tenth (conspiracy), and

eleventh (invasion of privacy/defamation) causes of action under

California’s “Anti-SLAPP” statute, California Code of Civil

Procedure Section 425.16, which provides in relevant part:

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 or 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.

***

As used in this section, “act in furtherance of a

person’s right of petition or free speech under

the United States or California Constitution in

connection with a public issue” includes: 

(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; 

(4) or 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

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an issue of public interest.

Cal. Code Civ. Pro. § 425.16(b)(1) & (e)(emphasis added). 

A court considering a motion to strike under the anti-SLAPP

statute must engage in a two-part inquiry. First, a defendant

must make an initial prima facie showing that the plaintiff’s

suit “aris[es] from” activity protected by the Anti-SLAPP

statute. Brill Media Co. v. TCW Group, Inc., 132 Cal. App. 4th

324, 329 (2005); Cal. Code Civ. Pro. § 425.16(b)(1). In

performing this analysis, the California Supreme Court has

stressed, “the critical point is whether the plaintiff’s cause of

action itself was based on an act in furtherance of the

defendant’s right of petition or free speech.” City of Cotati v.

Cashman, 29 Cal. 4th 69, 78 (2002) (emphasis in original).

If the defendant is able to make this threshold showing, the

burden shifts to the plaintiff to demonstrate a probability of

prevailing on the challenged claims. In practice, a plaintiff

must show that the claim 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.” Jarrow Formulas, Inc. v. LaMarche, 31 Cal. 4th

728, 744 (2003). Claims for which Plaintiff is able to satisfy

this burden are “not subject to being stricken as a SLAPP.” Id.

B. Motion to Dismiss.

The Fike Defendants move to dismiss the eighth cause of

action (civil RICO). Federal Rule of Civil Procedure 12(b)(6)

provides that a motion to dismiss may be made if the plaintiff

fails “to state a claim upon which relief can be granted.” 

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However, motions to dismiss under Fed. R. Civ. P. 12(b)(6) are

disfavored and granted only where the claim is legally

insufficient. The question before the court is not whether the

plaintiff will ultimately prevail; rather, it is whether the

plaintiff could prove any set of facts in support of his claim

that would entitle him to relief. See Hishon v. King & Spalding,

467 U.S. 69, 73 (1984). “A complaint should not be dismissed

unless it appears beyond doubt that plaintiff can prove no set of

facts in support of his claim which would entitle him to relief.” 

Van Buskirk v. CNN, Inc., 284 F.3d 977, 980 (9th Cir. 2002)

(citations omitted).

In deciding whether to grant a motion to dismiss, the court

“accept[s] all factual allegations of the complaint as true and

draw[s] all reasonable inferences” in the light most favorable to

the nonmoving party. TwoRivers v. Lewis, 174 F.3d 987, 991 (9th

Cir. 1999); see also Rodriguez v. Panayiotou, 314 F.3d 979, 983

(9th Cir. 2002). A court is not “required to accept as true

allegations that are merely conclusory, unwarranted deductions of

fact, or unreasonable inferences.” Sprewell v. Golden State

Warriors, 266 F.3d 979, 988 (9th Cir. 2001).

VI. DISCUSSION

A. Motion to Strike the Second, Third, Fourth, Seventh,

Ninth, Tenth, and Eleventh Causes of Action as to the

Fike Defendants.

The Fike Defendants advance a number of general arguments in

support of their motion to strike the Second, Third, Fourth,

Seventh, Ninth, Tenth, and Eleventh Causes of Action (all of

Plaintiff’s state law causes of action against the Fike

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Defendants). First, the Fike Defendants maintain that

California’s Anti-SLAPP statute applies to all of these claims.

If the Anti-SLAPP statute applies, Plaintiffs are required to

establish a probability of prevailing on the covered claims by

setting forth facts that support a prima facie case. 

The Fike Defendants maintain that Plaintiffs cannot

establish a prima facie case for any of the claims subject to the

motion to strike. Along with claim-specific arguments, the Fike

Defendants argue generally that (a) that California’s Litigation

Privilege, Cal. Civ. Code § 47(b), bars all of Plaintiffs’ state

law claims because the claims arise out of communications they

made as attorneys in the context of litigation; and (b) any state

law claims based upon a conspiracy theory are barred by

California Civil Code § 1714.10(a), which requires a plaintiff to

obtain a court order prior to filing a claim against an attorney

for civil conspiracy with his or her client. 

1. Legal Background.

a. California’s Anti-SLAPP Statute.

As discussed, a court considering a motion to strike under

the anti-SLAPP statute must engage in a two-part inquiry. First,

a defendant must make an initial prima facie showing that the

plaintiff’s suit “aris[es] from” activity protected by the AntiSLAPP statute. Brill Media, 132 Cal. App. 4th at 329; Cal. Code

Civ. Proc. § 425.16(b)(1). A cause of action does not “arise

from” protected activity simply because it is filed after

protected activity took place. Cashman, 29 Cal. 4th at 76-77. 

Nor does the fact “[t]hat a cause of action arguably may have

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been triggered by protected activity” necessarily mean that it

arises from such activity. Cashman, 29 Cal. 4th at 78. The

trial court must instead focus on the substance of the

plaintiff’s lawsuit in analyzing the first prong of a special

motion to strike. Scott v. Metabolife Intern., Inc., 115 Cal.

App. 4th 404, 413-414 (2004); see also Cashman, 29 Cal. 4th at

78. In performing this analysis, the California Supreme Court

has stressed, “the critical point is whether the plaintiff’s

cause of action itself was based on an act in furtherance of the

defendant’s right of petition or free speech.” Cashman, 29 Cal.

4th at 78 (emphasis in original). In other words, “the

defendant’s act underlying the plaintiff’s cause of action must

itself have been an act in furtherance of the right of petition

or free speech.” Id. 

If the defendant is able to make this threshold showing, the

burden shifts to the plaintiff to demonstrate a probability of

prevailing on the challenged claims. In practice, a plaintiff

must show that the claim 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.” Jarrow, 31 Cal. 4th at 738. Claims for which

Plaintiff is able to satisfy this burden are “not subject to

being stricken as a SLAPP.”

b. Plaintiffs’ General Objections to the

Application of the Anti-SLAPP Statute.

The Flores rase two general arguments, based on statutory

exemptions to the Anti-SLAPP law, in an attempt to establish that

the Anti-SLAPP provisions do not apply to any of their claims. 

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Section 425.17 exempts from Anti-SLAPP coverage certain public

interest lawsuits:

Section 425.16 does not apply to any action brought

solely in the public interest or on behalf of the

general public if all of the following conditions

exist:

(1) The plaintiff does not seek any relief greater

than or different from the relief sought for the

general public or a class of which the plaintiff

is a member. A claim for attorney's fees, costs,

or penalties does not constitute greater or

different relief for purposes of this subdivision.

(2) The action, if successful, would enforce an

important right affecting the public interest, and

would confer a significant benefit, whether

pecuniary or nonpecuniary, on the general public

or a large class of persons.

(3) Private enforcement is necessary and places a

disproportionate financial burden on the plaintiff

in relation to the plaintiff's stake in the

matter.

However, nowhere in the nine pages of Joe Flores’ opposition

brief or their 142 page complaint is there any indication that

this lawsuit satisfies the conditions set forth in Section

425.17. In fact, the record suggests it is strictly a private

dispute. Plaintiffs here seek monetary damages for themselves

only. None of Plaintiff’s claims purport to vindicate an

important right solely in the public interest or on behalf of the

general public. Plaintiffs have large, and very personal, stakes

in the outcome of this litigation. The section 425.17 exemption

does not apply.

Plaintiffs also argue that a second exemption, set forth in

§ 425.17(c) applies in this case. Section 425.17(c) provides: 

Section 425.16 [the Anti-SLAPP provisions] do[] not

apply to any cause of action brought against a person

primarily engaged in the business of selling or leasing

goods or services, including, but not limited to,

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insurance, securities, or financial instruments,

arising from any statement or conduct by that person if

both of the following conditions exist:

(1) The statement or conduct consists of

representations of fact about that person's or a

business competitor's business operations, goods,

or services, that is made for the purpose of

obtaining approval for, promoting, or securing

sales or leases of, or commercial transactions in,

the person's goods or services, or the statement

or conduct was made in the course of delivering

the person's goods or services.

(2) The intended audience is an actual or

potential buyer or customer, or a person likely to

repeat the statement to, or otherwise influence,

an actual or potential buyer or customer, or the

statement or conduct arose out of or within the

context of a regulatory approval process,

proceeding, or investigation, except where the

statement or conduct was made by a telephone

corporation in the course of a proceeding before

the California Public Utilities Commission and is

the subject of a lawsuit brought by a competitor,

notwithstanding that the conduct or statement

concerns an important public issue.

(emphasis added). Essentially, this provision exempts from the

Anti-SLAPP statute any statements or conduct made by a seller or

lessor of goods and services during the course of a commercial

transaction either to a potential buyer or customer. However,

the exemption only applies to causes of action brought against

“person[s] primarily engaged in the business of selling or

leasing goods or services....” The Fike Defendants, who are

attorneys, are not covered by the plain language of this

provision, even though, technically, as attorneys, they market

legal services to the public. Their alleged actions here do not

pertain to efforts to market their services nor were

representations made to potential consumers or to gain a

competitive advantage. This exception is also inapplicable.

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c. California’s Litigation Privilege.

California Civil Code § 47(b) provides in pertinent part.

A privileged publication or broadcast is one made:

(a) In the proper discharge of an official duty.

(b) In any (1) legislative proceeding, (2) judicial

proceeding, (3) in any other official proceeding

authorized by law, or (4) in the initiation or

course of any other proceeding authorized by law

and reviewable pursuant to Chapter 2 (commencing

with Section 1084) of Title 1 of Part 3 of the

Code of Civil Procedure, except as follows:

(1) An allegation or averment contained in

any pleading or affidavit filed in an action

for marital dissolution or legal separation

made of or concerning a person by or against

whom no affirmative relief is prayed in the

action shall not be a privileged publication

or broadcast as to the person making the

allegation or averment within the meaning of

this section unless the pleading is verified

or affidavit sworn to, and is made without

malice, by one having reasonable and probable

cause for believing the truth of the

allegation or averment and unless the

allegation or averment is material and

relevant to the issues in the action.

***

(c) In a communication, without malice, to a person

interested therein, (1) by one who is also

interested, or (2) by one who stands in such a

relation to the person interested as to afford a

reasonable ground for supposing the motive for the

communication to be innocent, or (3) who is

requested by the person interested to give the

information. This subdivision applies to and

includes a communication concerning the job

performance or qualifications of an applicant for

employment, based upon credible evidence, made

without malice, by a current or former employer of

the applicant to, and upon request of, one whom

the employer reasonably believes is a prospective

employer of the applicant. This subdivision

authorizes a current or former employer, or the

employer's agent, to answer whether or not the

employer would rehire a current or former

employee. This subdivision shall not apply to a

communication concerning the speech or activities

of an applicant for employment if the speech or

activities are constitutionally protected, or

otherwise protected by Section 527.3 of the Code

of Civil Procedure or any other provision of law.

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The most relevant portion of section 47 is subsection b, which

provides absolute privilege for any “publication or broadcast”

made in any judicial proceeding. California courts have given

this privilege an “expansive reach.” Rubin v. Green, 4 Cal. 4th

1187, 1193-94 (1993). It extends to any communication that bears

“some relation to any ongoing or anticipated lawsuit.” Id. at

1194. The privilege also applies to a wide range of causes of

action. The California Supreme Court noted “the only exception

to [the application of [section 47(b) to tort suits has been for

malicious prosecution.” Id. The California courts have applied

the privilege to claims of abuse of process, Pollock v. Univ. of

So. Cal., 112 Cal. App. 4th 1416 (2003), fraud, Carden v.

Getzoff, 190 Cal App. 3d 907 (1987), invasion of privacy, Ribas

v. Clark, 38 Cal. 3d 355, 364 (1985), and interference with

contract, Pacific Gas & Elec. Co. v. Bear Stearns & Co., 50 Cal.

3d 1118 (1990).

Critically, the privilege only applies to communicative

acts, not noncommunicative conduct. Rubin v. Green, 4 Cal. 4th

1187, 1195-96 (1993). For example, an attorney’s act of

counseling his or her client is covered, even if it is alleged

that the attorney made misrepresentations during the course of

such communications. Id. However, pure conduct, such as

eavesdropping, is not covered. Id. 

The Flores’ raise one general objection to the application

of the litigation privilege. The Flores point to language in

section 47 that appears to limit the applicability of section 47

to certain types of communications only if those communications

are made “without malice,” impliedly arguing that the Fike

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Defendants’ actions were made with malice and therefore should

not be covered by the privilege. (See J. Flores’ Opp’n at 30). 

But the “without malice” language, which is mentioned twice in

section 47, is inapplicable here. The phrase first occurs in an

exception to the litigation privilege for certain communications

made during the course of “marital dissolution or legal

separation.” See Cal. Civ. Code

§ 47(b)(1). It appears again in section 47(c), which provides:

A privileged publication or broadcast is one made:

(c) In a communication, without malice, to a person

interested therein, (1) by one who is also interested,

or (2) by one who stands in such a relation to the

person interested as to afford a reasonable ground for

supposing the motive for the communication to be

innocent, or (3) who is requested by the person

interested to give the information.

(emphasis added). Subsection (c) operates to protect against

liability for communications made outside the context of

litigation (i.e., statements that would not qualify for

protection under subsection (b)). The statute gives an example

of such a communication:

This subdivision applies to and includes a

communication concerning the job performance or

qualifications of an applicant for employment, based

upon credible evidence, made without malice, by a

current or former employer of the applicant to, and

upon request of, one whom the employer reasonably

believes is a prospective employer of the applicant.

Cal. Civ. Code § 47(c). With respect to communications falling

under the scope of subsection (c), the privilege only applies in

the absence of evidence of malice. However, Defendants do not

invoke this form of the privilege. Rather, they rely upon

subsection (b), at all times asserting the “litigation” privilege

only as it relates to communications made in the context of

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Access to the court is a constitutional right founded 2

upon the First Amendment. Cal. Motor Transport Co. v. Trucking

Unlimited, 404 U.S. 508, 510-11 (1972). 

18

pending or active litigation. The “without malice” language is

inapplicable here.

2. Second Cause of Action for Malicious Prosecution.

a. Applicability of Anti-SLAPP Statute.

Plaintiffs’ second cause of action for malicious prosecution

alleges that the Fike Defendants prosecuted the cross-complaint

in Flores I without probable cause as to both Joe Flores and

Connie Flores. There is only one act underlying this claim --

the filing of a cross-complaint. The Anti-SLAPP statute

explicitly covers “any written or oral statement or writing made

before a...judicial proceeding.” Cal. Code Civ. Pro. 

§ 425.16(e)(1); Jarrow, 31 Cal. 4th 728. 2

In addition to the general arguments discussed above,

Plaintiffs raise several additional arguments against application

of the Anti-SLAPP statute to this claim. None of these arguments

have merit. First, Plaintiffs place great emphasis on the phrase

“public issue” contained in the introductory paragraph of the

Anti-SLAPP statute: 

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 or

California Constitution in connection with a public

issue shall be subject to a special motion to strike...

Cal. Code Civ. Proc. § 425.16(b)(1). The Flores argue that the

Fike Defendants’ acts in filing the cross-complaint were not

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undertaken in connection with a “public issue” and therefore are

not covered by the statute. Plaintiffs operate under a mistaken

understanding of the statute. Section 425.16(e) explicitly

defines the phrase “act in furtherance of a person’s right of

petition or free speech under the United States or California

Constitution in connection with a public issue” to include “any

written or oral statement or writing made before a legislative,

executive, or judicial proceeding, or any other official

proceeding authorized by law.” (emphasis added). 

Plaintiffs again raise the commercial speech exception to

the Anti-SLAPP statute, Cal. Code Civ. Proc. § 425.17(c). As

discussed above, the plain language of this provision makes it

inapplicable to the Fike Defendants who advanced claims for money

allegedly due their clients, not to market their services as

attorneys. Moreover, Mr. Flores’ general discussion of

constitutional theory applicable to commercial speech is

misplaced. Nowhere does Mr. Flores explain or suggest why

general first amendment protections for categories of speech have

a bearing on whether the § 425.17(c) exception should be applied

in this case to these defendants. 

Finally, Mr. Flores cites Bertero v. National General

Corporation, 13 Cal. 3d 43 (1972), an appeal of a jury verdict in

a malicious prosecution case. In Bertero, the court acknowledged

that a malicious prosecution case could be based upon the filing

of a cross-complaint without probable cause. However, as Bertero

was a post trial proceeding and was decided before the passage of

the Anti-Slapp law, it is not relevant to the current inquiry. 

The Fike Defendants have satisfied the threshold burden of

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establishing that the Anti-SLAPP statute applies to the malicious

prosecution claim. As attorneys, they asserted claims to recover

alleged unpaid loans from Plaintiffs on behalf of a client. To

advance such claims in court, a public forum, implicates FMI’s

and the Fike defendants’ right to assert claims in a public

forum, in the form of written statements made in a judicial

proceeding.

b. Applicability of the Litigation Privilege.

The litigation privilege does not apply to claims of

malicious prosecution. Malicious prosecution actions are

permitted because “the policy of encouraging free access to the

courts is outweighed by the policy of affording redress for

individual wrongs when the requirements of favorable termination,

lack of probable cause, and malice are satisfied. Silberg, 50

Cal.3d at 216. This is perhaps the only exception to the

absolute nature of the litigation privilege. Id.; see also

Rubin, 4 Cal. 4th 1193-94. 

c. Merits of the Malicious Prosecution Claim.

Because Defendants have met their burden to prove the

applicability of the Anti-SLAPP statute, Plaintiff must then make

a “sufficient prima facie showing of facts to sustain a favorable

judgment if the evidence submitted by the plaintiff is credited.”

The elements of a prima facie case of malicious prosecution are

(1) a judicial proceeding favorably terminated; (2) lack of

probable cause; and (3) malice. Villa v. Cole, 4 Cal. App. 4th

1327, 1335 (1992). Malicious prosecution actions are disfavored

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under California law. Sheldon Appel. Co. v. Albert & Oliker, 47

Cal. 3d 863, 872 (1989) (tort of malicious prosecution “has

historically been carefully circumscribed so that litigants with

potentially valid claims will not be deterred from bringing their

claims to court by the prospect of a subsequent malicious

prosecution” action).

The first element is satisfied in this case because the

Flores’ obtained a favorable jury verdict in Flores I and

defeated the defendants’ cross-complaints. The Fike Defendants

maintain that Plaintiffs are unable to establish either lack of

probable cause or malice. 

(1) Probable cause. 

Here, Plaintiffs allege that the Fike Defendants prosecuted

the cross-complaint in Flores I without probable cause as to both

Joe and Connie Flores. The Flores’ make a number of general

arguments in support of this contention, but none of these

arguments satisfy Plaintiffs’ burden. 

First, Joe Flores suggests that the absence of probable

cause is established because the jury found that the Flores’ were

not liable under the cross-complainant. (J. Flores’ Opp’n at

17.) This argument defies logic. The first element of a prima

facie case of malicious prosecution is a “judicial proceeding

favorably terminated.” The jury’s verdict satisfies the first

element, but Joe Flores suggests that the verdict also satisfies

the second element -- absence of probable cause. If this were

the case, the second element would be redundant and unnecessary. 

A greater showing is needed to establish absence of probable

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cause.

 Probable Cause exists to file a claim whenever “any

reasonable attorney would have thought the claim tenable.” 

Sheldon Appel., 47 Cal. 3d at 885. Litigants have the right to

present claims that are arguably correct, “even if it is

extremely unlikely that they will win.” Id. at 885. Plaintiff

correctly points out that, even if a reasonable attorney might

believe in the merits of a claim, one cannot escape liability if

the action “was prosecuted with knowledge of the falsity of the

claim.” Albertson v. Raboff, 46 Cal. 2d 375, 382; Bertero, 13

Cal. 3d at 55. 

Turning then to the factual allegations contained within the

Complaint and the Flores’ oppositions to this motion to strike,

the Flores’ have not alleged facts to show absence of probable

cause or knowledge of the falsity of the claim. First, the

Flores’ conclusorily allege that the Fike Defendants lacked

probable cause to believe that any debt was owed by the Flores’

at all under the promissory note. They do not allege facts

showing why or how the Fike defendants could then know the claims

were meritless. But, the Fike Defendants represent that they

reviewed the accounting records and concluded that these records

evidenced a $9,843.66 debt to FMI. Although the jury in Flores I

ultimately found that the Flores did not owe DDJ, as assignee,

any money on the counterclaim, nothing in the record indicates

that the Fike Defendants knew at the time that the claim was

filed that the allegations in the counterclaim were false or that

the monetary claim was spurious. Nor is there any indication in

the record that no reasonable attorney would have believed the

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counter-claim debt owed was unjustified. (Plaintiffs bear the

burden of establishing as much in this case, and cannot rely upon

the trial record from Flores I unless there are undisputed

judicially noticeable facts that exist.)

Second, the Flores’ emphasize that, although Joe Flores

signed a promissory note to DDJ, DDJ later sold the note to a

third party, Taft & Trainer, Inc. The Fike Defendants

acknowledge that this transfer occurred, but maintain that DDJ

Inc. had an agreement with Taft & Trainer that DDJ would defend

the Flores I lawsuit and pursue any counterclaim for the Flores’

outstanding debt under the note. (Fike Decl. ¶16) The existence

of such an agreement was supported by written agreements. (Id.

at Exhibit 2.) Although the jury in Flores I ultimately found

that the Flores’ did not owe money to either DDJ or Taft &

Turner, there is absolutely no indication that the indemnity,

assignment, and litigation enforcement agreement was invalid,

and, even if invalid, that the Fike Defendants knew of any

invalidity or that no reasonable attorney would have believed the

agreement to be valid.

Finally, Ms. Flores specifically alleges that the Fike

Defendants lacked probable cause to claim that she was a

signatory to the promissory note. Accordingly, Ms. Flores

alleges that there was no probable cause to name her as a

counter-defendant. Ms. Flores correctly points out that the

promissory note itself repeatedly refers to Mr. Flores and never

to Ms. Flores (or Connie Flores). For example, it declares that

“DDJ, Inc. holds a secured interest in certain apples and

proceeds belonging to Mr. Flores.” However, the Fike Defendants

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submit that both Joe and Connie Flores were responsible for the

promissory note because both were signatories to various

packaging and marketing agreements and that the promissory note

was entered into as part of an overall package of agreements. 

(Fike Decl. ¶ 15.) Moreover, the promissory note itself states

that the note “is secured by the financing statement given to

lender from borrower pursuant to their Packing and Marketing

Agreement dated February 18, 1997.” (See Promissory Note.) 

The only relevant inquiry is whether the attorney’s client

provides facts that establish the existence of probable cause for

the lawsuit’s claims. The opposing party’s competing evidence is

irrelevant

Plaintiffs and their attorneys are not required, on

penalty of tort liability, to attempt to predict how a

trier of fact will weigh competing evidence, or to

abandon their claim if they think it likely that

evidence will ultimately weigh against them. They have

a right to bring a claim they think unlikely to

succeed, so long as it is arguably meritorious. 

Wilson v. Parker Covert & Chidester, 28 Cal. 4th at 822.

Plaintiffs offer no evidence suggesting that the Fike Defendants

had any reason to doubt the existence of probable cause to

believe that Ms. Flores was a proper counter-defendant.

(2) Malice.

To prove malice, Plaintiffs must show that the Fike

Defendants filed the underlying action with a wrongful motive. 

Centers v. Dollar Markets, 99 Cal. App. 2d 534, 541 (1950). 

Malice can be inferred from willful misconduct, see Drum v.

Bleau, Fox & Assoc., 107 Cal. App. 4 1009, 1020 (2003), but no th

willful misconduct, such as the intent to vex or annoy, on the

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part of the Fike Defendants is alleged in the complaint or

otherwise evident in the record. This omission is a fatal defect

in a malicious prosecution claim.

The Anti-Slapp law applies to Plaintiffs’ second cause of

action. However, Plaintiffs have failed to establish that this

claim 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.” Jarrow, 31

Cal. 4th at 738. The Fike Defendants’ motion to strike the

second cause of action for malicious prosecution is GRANTED, with

leave to amend.

3. Third Cause of Action for Abuse of Process.

Plaintiff’s third cause of action is entitled “malicious use

of process,” but appears to be a claim for “abuse of process.”

The tort of abuse of process constitutes “the use of a legal

process against another to accomplish a purpose for which it is

not designed.” Drum, 107 Cal. App. 4th at 1019. Its elements

are: (1) “an ulterior motive;” and (2) “a willful act in the use

of process not proper in the regular conduct of the proceedings.” 

Id.

The essence of the tort 'abuse of process' lies in the

misuse of the power of the court; it is an act done in

the name of the court and under its authority for the

purpose of perpetrating an injustice....

Here, Plaintiffs allege that the Fike Defendants abused

legal process in several ways: 

(1) By attempting to charge Joe Flores $0.53 per page for

copying FMI’s documents before the Flores filed suit;

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(2) By sending correspondence to another packing agent,

H&W, with an attached UCC-1 Financing Statement,

notifying H&W that FMI had a secured interest in the

Flores’ 1998 apple crop based on an outstanding debt,

thereby causing other packers to “blackball” the

Flores’; 

(3) By failing to produce documents in discovery that the

Fike Defendants later attempted to use at trial and by

destroying (or somehow aiding or having knowledge of

the destruction of) relevant documents that should have

been preserved for discovery. 

(Compl. ¶¶180, 182, 184, 189-192, 196.)

a. Applicability of the Anti-SLAPP Statute.

The Anti-SLAPP statute has been applied to abuse of process

claims where the underlying act arises from the exercise of the

right to petition the courts for redress. See Siam v. Kizilbash,

130 Cal. App. 4th 1563, 1570 (2005)(reasoning that a cause of

action for abuse of process is subject to the Anti-SLAPP statute

because “it arises from the exercise of the right of petition.”). 

The important question is whether the underlying act

constitutes an exercise of the right of petition and/or invokes

the court process. It is not so clear whether the Fike

Defendants’ initial demand that Plaintiffs pay $0.53 per page to

copy DDJ documents was made in connection with the underlying

lawsuit. In other words, it is not clear that Plaintiff’s

conduct invoked any “process” of the court or implicated the Fike

Defendants’ right to petition the courts. The dispute over copy

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costs occurred before any lawsuit was filed. Nor is it clear

whether a lawsuit was anticipated at that time. The copy charge

complaint, if not connected with a lawsuit, cannot constitute

“abuse of process.” Giving Plaintiffs the benefit of the doubt

on this point, even if Fike Defendants’ attempt to collect $0.53

per page for copying DDJ documents was made in anticipation of

litigation, the Anti-SLAPP statute would apply as the attempt to

collect copying costs is an incident of the litigation process by

which the Fike Defendants sought to defend DDJ before a court of

law. Moreover, the Flores, as prevailing parties, could have

sought to recover excessive copying costs through a cost bill or

otherwise addressed during the underlying lawsuit.

The Fike Defendants’ mailing of the notice of secured

interest to H&M is more closely connected to the Fike Defendants’

right of petition. Communications made in anticipation of

litigation may be protected by both the Anti-SLAPP provision and

the litigation privilege. See Briggs v. Eden Council for Hope &

Opportunity, 19 Cal. 4th 1106, 1115 (1999) (“Just as

communications preparatory to or in anticipation of the bringing

of an action or other official proceeding are within the

protection of the litigation privilege of Civil Code section 47,

subdivision (b)....such statements are equally entitled to the

benefits of section 425.16.”). The letter to H&M is a

communication made in anticipation of litigation. It

specifically puts another crop-lender/creditor that FMI/DDJ

expects H&W to “honor and recognize the prior secured interest

held by [FMI/DDC] in apple crops and proceeds otherwise belonging

to Mr. Flores. In the event that [H&W] distributes proceeds

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without regard to the security interest of [FMI/DDJ] in those

proceeds, [FMI/DDJ] will exercise all remedies available to it

with respect to such conduct.” (See Ex. B to Emerich Decl.

(emphasis added)). The mailing of this letter is an act

protected by the Anti-SLAPP statute, as it is a conventional

notice of the claim of a prior security interest in crops, which

endeavored to protect the priority of that security interest and

put the new lender on notice.

The allegations of discovery misconduct and the related

destruction of evidence are also acts that fall within the scope

of the Anti-SLAPP statute.

Defendants have met their burden of establishing that the

Anti-SLAPP statute should apply to this cause of action. 

b. Applicability of the Litigation Privilege.

Defendants assert generally that all of the acts which

underlie the abuse of process claim are subject to the litigation

privilege. As discussed above, the letter to H&M is a

communication sent in anticipation of litigation to protect a

claimed security interest, which naturally falls within the

coverage of the litigation privilege. The applicability of the

privilege to the other alleged acts is not so clear-cut. On the

one hand, the attempt to charge the Flores’ $0.53 per page for

copies is communicative, and arguably conduct: the act of

demanding payment for copies. Similarly, the Fike Defendants

alleged attempt to use documents at trial that were not produced

at discovery and the Fike Defendants alleged involvement in the

destruction of evidence is arguably conduct, not communication.

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However, such matters are inherently part of the discovery

process and were redressible under discovery rules and should

have been addressed during the underlying litigation.

Arguendo, even if the litigation privilege does not

absolutely bar this claim, the conduct is not sufficiently

described and not for a purpose the law intends to constitute

abuse of process as opposed to alleged discovery abuse.

c. Merits of the Abuse of Process Claim. 

Even if the litigation privilege does not apply, because the

Anti-SLAPP statute applies to all of the alleged acts underlying

Plaintiff’s abuse of process claim, Plaintiffs must establish a

possibility of prevailing on an abuse of process claim based upon

these facts. In other words, do these factual allegations set

forth a prima facie claim of abuse of process. The elements of

an abuse of process claim are: (1) “an ulterior motive;” and (2)

“a willful act in the use of process not proper in the regular

conduct of the proceedings.” 

The ulterior motive element can be inferred from proof of a

willful improper act, Drum, 107 Cal. App. 4th, at 1020, so the

critical question is whether Plaintiffs have established a

“willful act in the use of process not proper in the regular

conduct of the proceedings.” 

Put another way, to abuse process, a defendant must use

court process for a purpose not intended, such as to obtain a

collateral advantage. Plaintiffs’ allegations are confusing, but

it can be inferred from Plaintiffs’ submissions that in early

1998, the Flores began to suspect that DDJ was using

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inappropriate accounting practices to calculate the amount of

moneys owed to the Flores’ for several years worth of apple

crops. The Flores began to demand access to DDJ’s accounting

records but were never satisfied with the manner and scope of

access granted to those documents. The specific allegation of

the Complaint is that costs were wrongfully demanded for copying

these documents. The Flores believed they were entitled to

copies of accounting for their crops, without having to pay for

them. They allege that the Fike Defendants and DDJ believed (at

least at the time) that defendants were entitled to be reimbursed

for the costs of copying the documents. It also appears that the

Flores’ and the Fike Defendants had numerous disagreements as to

the time, manner, and method of access to the accounting

documents. 

Eventually, the Flores’ turned to the Marketing Enforcement

Branch of the California Department of Food & Agriculture (“MEB”)

to assist in resolving the disputes over access to the documents. 

Individuals at MEB appear to have corresponded with the Fike

Defendants to direct the Fike Defendants’ attention to applicable

regulations. These regulations required DDJ to afford the

Flores’ access to documents concerning the marketing of their

fruit. This and other correspondence eventually resulted in an

agreement that the Fike Defendants and DDJ would provide the

Flores with copies of certain files. Critically, however,

nowhere in the complaint is it alleged that it was improper for

the Fike Defendants to demand reimbursement for the costs of

copying documents for the Flores. Nor could it be. (It is also

worth noting that the Fike Defendants ended up not charging the

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Flores’ $0.53 per page.) Plaintiffs have made no allegation that

the demand for copy cost reimbursement was “a willful act in the

use of process not proper in the regular conduct of the

proceedings.” Moreover, the issue could and should have been

redressed at the underlying trial. 

Even if the notice of secured interest sent to H&W was not a

communication protected by the litigation privilege, the mailing

of that notice which was a normal step a secured party takes to

protect priority of a security interest and was not an abuse of

process. Nothing submitted demonstrates that the Fike Defendants

lacked probable cause to believe that the Flores’ actually owed

money to FMI/DDJ pursuant to the promissory note and that a filed

financing statement reflecting a security interest in the Flores’

crops had been granted and perfected. Sending notice of the

second promissory note debt for crop loans along with a warning

that FMI/DDJ would take steps to protect its security interest

was a commercially reasonable and permissible action, unless

Plaintiffs can allege contrary facts. 

Although the Fike Defendants acknowledge that there were

numerous discovery disputes during the Flores I litigation,

nothing in the record indicates that the Fike Defendants engaged

in “a willful act in the use of process not proper in the regular

conduct of the proceedings.” In the hundreds of pages of

submissions from the Flores regarding the instant motions, the

alleged discovery violations are mentioned only a few times.

Specifically, Joe Flores’ declaration, at paragraphs 60 and 61,

states:

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On January 14, 2003, after Fike, on numerous

occasions declaring that there were no more documents

in their care, custody or control, suddenly by Court

Order, manages to find numerous documents previously

requested which he denied existed. [citations]

Accordingly, it is well documented and further

evidenced that Defendants, David R. Emerich, Esq., and

David A. Fike, Esq., knew or should have known they

were abusing the process since inception of this

matter, which commenced on April 29, 1999 [citation],

and continued on through pre-trial discovery by the

spoilation and concealment of evidence...

These conclusory allegations are insufficient to establish

that the Fike Defendants willfully used “process not proper in

the regular conduct of the proceedings.” At most, they suggest a

violation of civil discovery rules. Such a violation, on its

own, does not constitute an abuse of process. Moreover, there

were adequate remedies to enforce the discovery rules in the

prior case. It is impermissible to sue for prior violations of

discovery rules in a subsequent lawsuit. There are any number of

legitimate (i.e., not improper) reasons why documents initially

not disclosed might later be provided in discovery. This is the

nature of civil litigation. 

The Fike Defendants’ motion to strike the third cause of

action is GRANTED.

4. Fourth Cause of Action for Violation of the

Uniform Fraudulent Transfer Act (“UFTA”).

 Plaintiff alleges that various defendants engaged in

unlawful transfers in violation of the Uniform Fraudulent

Transfers Act (UFTA). The complaint sets forth the dates,

amounts, and parties involved in each allegedly fraudulent

transfer. Critically, however, the Fike Defendants are not

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mentioned in any of these specific fraudulent transfer

allegations. Rather, the UFTA allegation only relates to the

Fike defendants in two ways. First, Plaintiffs allege that the

Fike Defendants’ activities bought time for the other defendants

to plan and execute the fraudulent transfers:

[T]he malicious prosecution as alleged in the SECOND

CAUSE OF ACTION, the malicious abuse of process as

alleged in the THIRD CAUSE OF ACTION, [the statutory

violations] as alleged in the EIGHTH CAUSE OF ACTION,

and Conspiracy to Defraud, to Interfere with the

Business Relationship, to Unlawfully Injure a Business,

to Destroy a Business, and to Defraud a Creditor...as

alleged in the TENTH CAUSE OF ACTION...played a major

contributing factor in allotting time for the planning

of the actual fraudulent transfer of proceeds belonging

to ALTER EGO DDJ, INC. and AlTER EGO DDJ, LLC by [the

Fike Defendants] with the actual intent to hinder,

delay or defraud some or all of ALTER EGO DDJ, INC. and

ALTER EGO DDJ, LLC’s then and future creditors

including and principally Plaintiffs in connection with

the collection of their claims. 

(Compl. at 71.) This passage arguably suggests that the Fike

Defendants contributed to “allotting time” for the fraudulent

transfers by defending against the Flores I lawsuit, filing the

counter-claim, and taking various other steps to protect its

clients interests. Second, Plaintiffs suggest that the Fike

Defendants are liable in fraud for accepting payment from DDJ for

services rendered. 

a. Applicability of the Anti-SLAPP Statute.

The alleged acts are all related to the Fike Defendants’

right to petition the courts to represent clients as attorneys

and are therefore covered by the Anti-SLAPP statute. 

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b. Applicability of the Litigation Privilege.

The Fike Defendants maintain that the acts alleged in this

cause of action are protected by the litigation privilege as

well. However, it is difficult to determine the applicability of

the privilege because neither the complaint or any subsequent

filing explains the exact nature of the Fike Defendants’ conduct

that allegedly contributed to “allotting time” for the other

defendants to engage in fraudulent transfers. There is not even

conduct alleged that constitutes a fraudulent conveyance. The

parties are not required to guess as to the basis of the claims. 

As a general matter, each party to litigation is entitled to have

legal representation of its choice. 

c. Merits of the Uniform Fraudulent Transfer Act

Claim.

Again, even if the litigation privilege is inapplicable,

because the Anti-Slapp statute applies, the Flores must establish

that this claim 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.” 

Jarrow, 31 Cal. 4th at 738. 

A transfer of assets made by a debtor is fraudulent as to a

creditor if the transfer was made with an actual intent to

defraud any creditor, or was made without receiving reasonably

equivalent value. Cal. Civil Code § 3439.04; Reddy v. Gonzales,

8 Cal. App. 4th 188, 122-23 (1992).

First, Plaintiffs assertion that the Fike Defendants’

committed fraud by accepting payment for services rendered is not

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legally cognizable. 

An encumbrance by a debtor to an attorney, made for

value in the form of an antecedent obligation for legal

services, is not fraudulent as to another creditor,

under applicable provisions of the Uniform Fraudulent

Transfer Act, and this is true even though the transfer

was a preference that resulted in the debtor being

unable to satisfy debts of other creditors. 

Wyzard v. Goller, 23 Cal. App 4th 1183, 1185 (1994).

Second, an allegation that the Fike Defendants intentionally

worked to “allot time” for the other defendants to engage in

fraudulent transfers is legally unintelligible. Plaintiffs have

submitted correspondence from the Fike Defendants to Plaintiffs

and others, which is covered by the litigation privilege. No

facts are alleged as to how the Fike Defendants engaged in any

conduct that helped allot time for the other defendants to engage

in fraud, or that the Fike Defendants engaged in any improper

conduct or had any knowledge or intent to defraud. Conclusory

allegations do not substitute for necessary facts to maintain a

claim, particularly in the face of an Anti-Slapp motion to

strike. 

The Fike Defendants’ motion to strike the fourth cause of

action is GRANTED.

5. The Seventh Cause of Action for Conversion and

Conspiracy to Convert. 

Plaintiffs allege that many of the individual and corporate

defendants committed a number of acts of conversion. As with the

UFTA claim above, Plaintiffs assert that the Fike Defendants

aided the other defendants’ acts of conversion, by “conspiring,

participating, and aiding and abetting by and through their

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actions as attorney(s) of record for Defendants... [the]

successful...unlawful practice of conversion by means of []

fraudulent transfers....” (Compl. ¶342.) These conclusory

allegations have no legal significance. It is not alleged that

the Fike Defendants independently converted the Flores’ property,

only that they conspired to do so. This is not a legally

cognizable claim.

In California, Civil Code § 1714.10 requires a plaintiff to

obtain a court order prior to filing any claim premised upon an

attorney’s conspiracy with a client:

No cause of action against an attorney for a civil

conspiracy with his or her client arising from any

attempt to contest or compromise a claim or dispute,

and which is based upon the attorney's representation

of the client, shall be included in a complaint or

other pleading unless the court enters an order

allowing the pleading that includes the claim for civil

conspiracy to be filed after the court determines that

the party seeking to file the pleading has established

that there is a reasonable probability that the party

will prevail in the action.

§1714.10(a)(emphasis added). Failure to seek such an order is a

complete defense to the filing of any action for civil

conspiracy, and may form the basis of a motion to strike. 

§ 1714.10(b). 

The allegation in this cause of action falls squarely within

the coverage of this provision and Plaintiffs did not obtain a

court order prior to filing this claim. 

The Flores’ rejoin by pointing to language in § 1714.10(c)

which carves out an exception for an attorney’s acts which “go

beyond the performance of a professional duty to serve the client

and involve a conspiracy to violate a legal duty in furtherance

of the attorney's financial gain.” (See J. Flores’ Opp’n at 22.) 

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As discussed, this was not a “financial statement” it 3

was a standard-form UCC notice of secured interest.

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However, the complaint fails to allege the existence of acts that

go beyond the performance of a professional duty and/or that

violate a legal duty in furtherance of the Fike Defendants’ own

financial interests.

The Fike Defendants’ motion to strike the seventh cause of

action is GRANTED.

6. Ninth Cause of Action for Negligent Interference

With or Procurement of a Breach of Contract.

Plaintiffs’ negligent interference with contract claim

alleges that the Fike Defendants negligently sent a copy of the

Flores’ “financial statement” to H&W. As a result, Plaintiffs’ 3

assert that they lost their contract with H&W. As discussed

above, the sending of the notice of a security interest to H&W

was an act taken in anticipation of litigation which is protected

by both the Anti-SLAPP statute and the litigation privilege. The

litigation privilege operates as an absolute bar to tort

liability. Accordingly, the Fike Defendants’ motion to strike

this cause of action from the complaint is GRANTED.

7. Tenth Cause of Action for Conspiracy to Defraud. 

Plaintiffs’ tenth cause of action alleges that the Fike

Defendants conspired with other individual defendants (1) to

cover up unlawful activities by filing a counterclaim against

Plaintiffs in Flores I; and (2) to interfere with Plaintiffs’

contractual business relationship with another fruit packing

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company. Specifically, the complaint also alleges that Emerich &

Fike were paid more than $100,000.00 in attorneys fees to

accomplish many of the allegedly “questionable business

transactions” described in the complaint. (Compl. at 510.) In

response, the Fike Defendants assert that they received only

$10,000 from their clients, with the remaining balance being paid

out by the clients’ insurer, Fireman’s Fund. (See David Fike

Decl. at ¶8, Doc. 34). 

As discussed above, California Civil Code § 1714 operates to

bar this cause of action completely, because Plaintiffs failed to

obtain a court order prior to filing this conspiracy claim. The

Fike Defendants’ motion to strike the tenth cause of action is

GRANTED. 

8. Eleventh Cause of Action for Invasion of Privacy/

Defamation.

Plaintiffs’ eleventh cause of action for invasion of privacy

alleges that the Fike Defendants sent a copy of the Flores’

“financial statement” to H&W. Plaintiffs allege that this

constituted an invasion of privacy and defamation. As with the

negligent interference with contract claim, the sending of the

notice of secured interest to H&W was an act taken in

anticipation of litigation which is protected by both the AntiSLAPP statute and the litigation privilege. The litigation

privilege operates as an absolute bar to tort liability. 

Accordingly, the Fike Defendants’ motion to strike the eleventh

cause of action is GRANTED.

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B. Motion to Dismiss the Eighth Cause of action for Civil

Racketeering in violation of 18 U.S.C. § 1961. 

Defendants move separately to dismiss the eighth cause of

action (Civil Racketeering). Plaintiffs allege generally that

the “Defendants” engaged in Racketeering to further the general

goal of misappropriating funds belonging to the bankruptcy

estate. Specifically, the complaint alleges that one of the DDJ

Defendants committed mail fraud by mailing allegedly fraudulent

documents prepared by one of the other DDJ defendants. As to the

Fike Defendants, the complaint alleges generally that the Fike

Defendants committed wire fraud by faxing allegedly false

documents to Plaintiffs during discovery in Flores I. (Compl. at

¶336.) Plaintiffs also conclusorily describe the allegedly false

document. (Compl. at ¶389.)

A civil RICO complaint must at least allege: “(1) conduct

(2) of an enterprise (3) through a pattern (4) of racketeering

activity (known as ‘predicate acts’) (5) causing injury to

plaintiff's ‘business or property.’” Living Designs, Inc. v.

E.I. Dupont de Nemours and Co., 431 F.3d 353, 361 (9th Cir. 2005) 

Here, Plaintiffs allege that the Fike Defendants violated

sections 1962(c) (conducting the affairs of a racketeering

enterprise) and (d) (conspiring to commit racketeering). The

racketeering enterprise must exist independently from the acts of

racketeering. Chang v. Chen, 80 F.3d 1293, 1298-99 (9th Cir.

1996). Assumedly, Plaintiffs claim the law firm is a

racketeering enterprise, although they have not so alleged. 

Section 1961 enumerates acts which are considered to be

“racketeering activity” (i.e., “predicate acts”). Included is

“any act or threat involving murder, kidnapping, gambling, arson,

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robbery, bribery, extortion, dealing in obscene matter, or

dealing in a controlled substance or listed chemical (as defined

in Section 102 of the Controlled Substances Act), which is

chargeable under State Law and punishable by imprisonment for

more than one year.” § 1961(1)(A). Also included are any of

more than twenty types of conduct indictable under enumerated

provisions of the United States Code, ranging from mail fraud and

wire fraud, through robbery and extortion, to white slave trade.

§ 1961(1)(B). Finally, a “predicate act” may also be established

by any offense involving fraud “connected with” a bankruptcy

case, “fraud in the sale of securities,” or any act related to a

controlled substance or listed chemical “punishable’ under

federal law.” § 1961(1)(C). 

Plaintiffs have failed to adequately allege facts that show

the Fike Defendants committed a predicate act. Here, Plaintiffs

conclusorily allege that the Fike Defendants engaged in a

laundry-list of purported predicate acts: Theft From Interstate

Shipments (18 U.S.C. 659); Mail Fraud (1341); Wire Fraud (1342);

Interstate and Foreign Travel to Aid in Racketeering Enterprise

(1952); Laundering of Monetary Instruments (1956); Engaging in

Monetary Transactions in Property Derived from Specified Unlawful

Activity (1957) and Trafficking in Counterfeit Goods (2320).

(Compl. at ¶362, 367). However, Plaintiffs only mention the Fike

Defendants in the context of Mail Fraud, Wire Fruad, and Engaging

in Monetary Transactions in Property Derived From Specified

Unlawful Activity.

As a threshold matter, Federal Rule of Civil Procedure 9(b)

applies to RICO Fraud allegations, including Mail Fraud and Wire

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Fraud. Moore v. Kayport Package Express, Inc., 855 F.2d 531, 541

(9th Cir. 1989). Rule 9(b) requires that the pleader state the

“time, place, and specific content of the false representations,

as well as the identities of the parties to the

misrepresentation.” Plaintiffs have not met this standard here

and the Mail Fraud and Wire Fraud claims must be dismissed. 

As to the allegation that the Fike Defendants engaged in

Monetary Transactions in Property Derived From Specified Unlawful

Activity, Plaintiffs have not properly pled such a claim against

the Fike Defendants. The elements of such an claim are: (1) the

defendant engaged or attempted to engage, (2) in a monetary

transaction, (3) in criminally derived property that is of value

greater than $10,000.00, (4) knowing that the property is derived

from unlawful activity, and (5) that the property is in fact

derived from specified unlawful activity. Here, Plaintiffs

allege that the Fike Defendants received payment for services

rendered as counsel to the DDJ Defendants. Wholly absent from

the complaint is any allegation that such payments were illegal

or represented the proceeds of unlawful activity; or that the

Fike Defendants knew this money was derived from unlawful

activity. This cannot serve as a predicate offense under the

RICO statute. 

Moreover, even if Plaintiffs had alleged the commission of a

predicate act, Plaintiffs have in no way alleged that the Fike

Defendants violated 1962(c) by conducting the affairs of a

racketeering enterprise that was independent of the racketeering

acts. Chang, 80 F.3d at 1298-99. To “conduct or participate

directly or indirectly in the conduct of such [an] enterprise [],

one must participate in the operation or management of the

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enterprise. Reves v. Ernst & Young, 507 U.S. 170, 185

(1993)(finding that accounting firm could not be liable under

1962(c) merely by being associated with the enterprise). See

also Baumer v. Pachl, 8 F.3d 1341 (9 Cir. 1993)(finding that a th

defendant attorney was not liable under 1962c even though he took

numerous steps to perpetuate the alleged fraud, including the

preparation of two letters designed to forestall and cover up the

fraud). Plaintiffs have not alleged that the Fike Defendants

participated in the management of DDJ. 

Plaintiffs also allege that the Fike Defendants conspired to

violate RICO under 18 U.S.C. 1962(d). But, that provision

provides that “it shall be unlawful for any person to conspire to

violate any of the provisions of subsection (a), (b) or (c) of

this section.” There can be no RICO conspiracy without having

committed a RICO violation. Here, Plaintiffs’ allegations under

1962(c) are insufficient, and their allegation under 1962(d)

fails as well. 

Defendants’ motion to dismiss the eighth cause of action is

GRANTED WITHOUT PREJUDICE. 

///

///

///

///

///

///

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VII. CONCLUSION

The Fike Defendants’ motions to strike and to dismiss are

GRANTED in their entirety. Any amended complaint shall be filed

within fifteen (15) days following service of this decision by

the Clerk of Court. 

Dated: February 21, 2006

/s/ OLIVER W. WANGER

 

Oliver W. Wanger

UNITED STATES DISTRICT JUDGD

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