Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_08-cv-00679/USCOURTS-caed-2_08-cv-00679-0/pdf.json

Parties Involved:
Grupo Cayo Nancy, S.A.
Appellant
Grupo Islas Tropicales, S.A.
Appellant
Patricia Hermanson
Appellee
Shepard Johnson
Appellant
David Miner
Appellee
Solarte Plantation, S.A.
Appellant

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UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

In re:

SHEPARD JOHNSON and MONTE

JOHNSON,

NO. CIV. S-08-679-LKK 

Debtors,

 

 

 O R D E R

SHEPARD JOHNSON, an individual,

GRUPO ISLAS TROPICALES, S.A.,

GRUPO CAYO NANCY, S.A., and

SOLARTE PLANTATION, S.A.,

Panamanian Corporations,

Plaintiffs,

v.

MONTE WATSON, et al, 

Defendants.

 

DAVID MINER, an individual,

 Counter-Claimant,

v.

SHEPARD JOHNSON, an individual,

et al.,

Counter-Defendants.

 

Case 2:08-cv-00679-LKK Document 6 Filed 05/05/08 Page 1 of 7
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Pending before the court is plaintiffs’ motion for leave to

appeal an interlocutory decision of the bankruptcy court in an

adversary proceeding granting defendants’ motion for partial

summary judgment and judgment on the pleadings. The bankruptcy

judge granted the motion on the grounds that the alleged conduct

giving rise to suit -- communication directed toward obtaining a

criminal prosecution against plaintiff Shepard Johnson -- was

protected by the litigation privilege.

Plaintiffs Shepard Johnson, Grupo Islas Tropicales, S.A.,

Grupo Cayo Nancy, S.A., and Solarte Planatation, S.A. are the

developers of property on Isla Solarte, an island off the coast of

Panama. FAC ¶ 4. Defendants David Miner and Patricia Hermanson

purchased lots from plaintiffs, but a dispute subsequently arose

when defendants allegedly refused to agree to certain covenants and

restrictions on the land. FAC ¶¶ 33-34. Defendants then allegedly

engaged in a conspiracy against plaintiffs by initiating false

criminal charges against plaintiffs in Panama, where there is

allegedly no right to a jury trial. FAC ¶¶ 41, 56. Plaintiffs

subsequently brought suit against defendants asserting, among other

things, fraud and extortion. FAC ¶¶ 110, 179-182.

According to plaintiffs, defendants sent emails to plaintiff

Johnson threatening him with criminal prosecution if he did not

comply with demands concerning Isla Solarte, including the demand

that title be issued free of covenants and restrictions.

Defendants then allegedly carried out their threats by filing

criminal charges against Johnson in Panama and then publishing

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defamatory statements on Panamanian television. Plaintiffs also

allege that defendants agreed to drop the criminal charges only if

Johnson would accede to demands regarding the Isla Solarte

property.

Defendants subsequently filed their motion for partial summary

judgment and judgment on the pleadings arguing that the complained

of conduct was protected by the litigation privilege. The

bankruptcy judge granted that motion, effectively ruling from the

bench on March 11, 2008 and subsequently issuing a minute order on

March 14, 2008. Plaintiffs then filed the present motion for leave

to appeal.

II. Standard

The jurisdiction of a federal district court to entertain an

appeal from a bankruptcy court is governed by 28 U.S.C. § 158(a),

which provides, in pertinent part, that “district courts of the

United States shall have jurisdiction to hear appeals [] from final

judgments, orders, and decrees . . . and [] with leave of the

court, from other interlocutory orders and decrees.” 28 U.S.C. §

158(a).

In deciding whether leave should be granted, the court applies

the general standard for appeals of interlocutory orders set forth

in 28 U.S.C. § 1292(b). In re Bretain, 215 B.R. 438, 441 (9th Cir.

B.A.P. 1997). Three conditions must be satisfied: (1) there must

be a controlling question of law, (2) on which there is substantial

grounds for difference of opinion, and (3) an immediate appeal

would materially advance the ultimate termination of the

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litigation. In re Cement Antitrust Litig., 673 F.2d 1020, 1026

(9th Cir. 1982).

III. Analysis

Plaintiffs argue that the controlling question of law in this

case is whether conduct that would otherwise give rise to a claim

for civil extortion may nevertheless be protected by the

litigation privilege provided by California Civil Code § 47(b).

“The usual formulation is that the privilege applies to any

communication (1) made in judicial or quasi-judicial proceedings;

(2) by litigants or other participants authorized by law; (3) to

achieve the objects of the litigation; and (4) that have some

connection or logical relation to the action.” Silberg v.

Anderson, 50 Cal. 3d 205, 212 (1990). 

Plaintiffs contend that the California Supreme Court’s

decision in Flatley v. Mauro, 39 Cal. 4th 299 (2006), left open the

question of whether the litigation privilege applies to civil

extortion. In Flatley, the court addressed the issue of whether

speech or petition activity that is clearly illegal, such as

criminal extortion, is protected by the anti-SLAPP (strategic

lawsuits against public policy) statute. Id. at 320. The court

held that it was not. It only discussed the issue of the

litigation privilege to the extent that it rejected the notion that

the protections of the litigation privilege were coterminous with

the protections of the anti-SLAPP statute. Id. at 325 (“we reject

[the] contention that, because some forms of illegal

litigation-related activity may be privileged under the litigation

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privilege, that activity is necessarily protected under the

anti-SLAPP statute.”).

Plaintiffs are therefore technically correct in stating that

Flatley did not address the issue of whether the litigation

privilege protects conduct that would otherwise constitute

extortion, because the court was only faced with the task of

construing the anti-SLAPP statute. That said, plaintiffs’

conclusion that Flatley therefore left an unresolved void in

California law is erroneous. In applying the litigation privilege,

the legally relevant question is not whether the communication at

issue would otherwise be illegal but whether the communication

achieves the objects of litigation and has some connection or

logical relation to it. Far from presenting an unresolved question

of law, these standards are in fact well-settled under California

law. Silberg, 50 Cal. 3d at 212.

In order for there to be a “controlling question of law,”

there must be “a ‘pure question of law,’ not a mixed question of

law and fact or an application of law to a particular set of

facts.” Sierra Foothills Public Utility Dist. v. Clarendon America

Ins. Co., No. 05-CV-0736 AWI/SMS, 2006 WL 2085244, at *3 (E.D. Cal.

Jul. 25, 2006). Congress “used ‘question of law’ in much the same

way a lay person might, as referring to a ‘pure’ question of law

rather than merely to an issue that might be free from a factual

contest. The idea was that if a case turned on a pure question of

law, something [that] could [be] decide[d] quickly and cleanly

without having to study the record, the court should be enabled to

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do so without having to wait till the end of the case.” Ahrenholz

v. Bd. of Trustees, 219 F.3d 674, 676-77 (7th Cir. 2000). 

Here, however, plaintiffs have not demonstrated the existence

of a pure question of law. For example, plaintiffs argue that the

litigation privilege does not apply where the legal forum (e.g.,

Panama) lacks adequate procedural safeguards. See Beroiz v. Wahl,

84 Cal. App. 4th 485, 494 n.5 (2000) (“evidence that a foreign

proceeding is devoid of adequate procedural safeguards may raise

a triable issue as to whether communications connected with the

proceeding fall within the scope of the absolute privilege”).

Relying on a State Department report, however, the bankruptcy judge

found that there was no triable issue of fact on this point. Tr.

71:17-72:12. Similarly, plaintiffs argue that defendants

“litigated to the press” through Panamanian television, which is

not protected by the litigation privilege, Rothman v. Johnson, 49

Cal. App. 4th 1134 (1996), but defendants argued that there was no

evidence demonstrating that they had made statements to the press.

Unlike a pure question of law, the overarching issue raised

by this putative appeal is whether the bankruptcy court correctly

applied the litigation privilege to the facts of this case. The

disputes regarding whether defendants’ allegedly defamatory

statements were made to achieve the objects of litigation, whether

they were sufficiently close in time to when the criminal

proceedings were instituted, and whether they had a sufficient

functional nexus to those proceedings are all record-specific

issues -- not controlling questions of law. See Ahrenholz, 219

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F.3d at 676-77. 

Further, even if plaintiffs could show the existence of a

controlling question of law, they have not demonstrated that there

would be a substantial grounds for a difference of opinion in how

the bankruptcy resolved the motion. The communications at issue

include the filing of criminal charges, statements to possible coparties informing them of potential or existing legal action, and

settlement demands -- all of which are protected under the

litigation privilege. See Wang v. Hartunian, 111 Cal. App. 4th

744, 749 (2002); eCash Techs., Inc. v. Guagliardo, 210 F. Supp. 2d

1138, 1152 (C.D. Cal. 2001); Rothman, 49 Cal. App. 4th at 1148.

Accordingly, this matter is inappropriate for interlocutory appeal.

Conclusion

For the reasons explained above, the motion is DENIED.

IT IS SO ORDERED.

DATED: May 5, 2008.

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