Filed 3/15/21 Ventures v. Rodeo Capital CA2/7

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions 

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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SEVEN

JHM VENTURES,

Plaintiff, Appellant, and 

 Cross-Respondent,

v.

RODEO CAPITAL, INC. et al.,

Defendants, Respondents, 

 and Cross-Appellants.

B298909

(Los Angeles County

Super. Ct. No. 18STCV10373)

APPEALS from an order of the Superior Court of 

Los Angeles County, John P. Doyle, Judge. Reversed with 

directions.

Levatolaw and Stephen D. Weisskopf for Plaintiff,

Appellant, and Cross-Respondent.

Ervin Cohen & Jessup and Michael C. Lieb for Defendants, 

Respondents, and Cross-Appellants. 

___________________________
2

INTRODUCTION

Rodeo Capital, Inc. and its officers persuaded JHM 

Ventures to loan $400,000 in a junior position to the owners of a 

commercial property in Illinois after another, senior group of 

investors had already lent the owners of the property $3,100,000. 

After the property owners failed to repay JHM’s loan, Rodeo 

Capital’s officers persuaded JHM not to foreclose by falsely 

claiming they would “get [JHM’s] money back” and by 

misrepresenting and concealing certain information about the 

property. By the time JHM learned the truth, the property was 

“under water.” Rodeo Capital and the senior investment group 

subsequently foreclosed on the property and sought to extinguish

JHM’s interest. JHM sued Rodeo Capital, its officers, and the 

senior investors, claiming JHM would not have made the loan or, 

having made the loan, would have foreclosed on the property 

sooner had they not misrepresented and concealed material 

information about the property. 

Rodeo Capital, its officers, and some of the senior investors 

filed a special motion under Code of Civil Procedure section 

425.16 (section 425.16) to strike certain allegations in JHM’s

complaint, arguing the allegations sought relief for petitioning 

activity. In particular, the moving defendants argued the 

complaint included claims based on prelitigation statements that 

persuaded JHM not to foreclose on the property and that arose 

from the foreclosure action filed by Rodeo Capital and the senior 

investors. The trial court granted in part and denied in part the 

motion, and both sides appealed. 

We conclude the moving defendants failed to show that 

they made the challenged misrepresentations and omissions in 
3

anticipation of litigation contemplated in good faith and under 

serious consideration or that JHM sought relief based on Rodeo 

Capital’s foreclosure action. Therefore, we hold the challenged

conduct falls outside the scope of section 425.16, vacate the trial 

court’s order, and direct the trial court to enter a new order 

denying the special motion to strike.

FACTUAL AND PROCEDURAL BACKGROUND

A. JHM Invests in Illinois Real Estate

In or around December 2013 Rodeo Capital officers Richard 

Katz and Gregg Bernstein (collectively with Rodeo Capital, the 

Rodeo Capital Group) approached JHM about investing in a 

commercial property in Illinois. A group of investors (the Illinois 

Borrowers) were looking for a $3,500,000 loan, $3,100,000 of 

which would come from another investment group who would be 

in a position senior to JHM (the Senior Investors). Katz and 

Bernstein asked JHM to loan the remaining $400,000 to the 

Illinois Borrowers and receive as security a second mortgage on 

the property.1 

1 Under Illinois law a mortgage is “any consensual lien 

created by a written instrument which grants or retains an 

interest in real estate to secure a debt or other obligation.” 

(735 Ill. Comp. Stat. Ann. 5/15-1207; see Paliatka v. Bush

(Ill. App. Ct. 2018) 109 N.E.3d 343, 350.) In California

promissory notes are secured by deeds of trust, not mortgages, 

although deeds of trust and mortgages “perform the same basic 

function, and . . . a deed of trust is ‘practically and substantially 

only a mortgage with power of sale.’” (Domarad v. Fisher & 

Burke, Inc. (1969) 270 Cal.App.2d 543, 553; see Jenkins v. 
4

The Rodeo Capital Group acted as investment advisors to 

JHM and conducted due diligence on the Illinois property. 

According to JHM, Katz and Bernstein made numerous 

representations to induce JHM to make the loan, including that 

the Senior Investors would act as a “friendly first,” meaning that, 

in the event of a default, the Senior Investors would act jointly 

with JHM to foreclose. Katz and Bernstein allegedly told JHM 

“they were all in this investment together.” Katz and Bernstein 

also presented JHM with an appraisal valuing the property at 

$5,250,000 and said the property had a “credit worthy anchor 

tenant.” Based on these representations, JHM in December 2013 

agreed to make a $400,000 loan to the Illinois Borrowers for a 

term of one year. Specifically, JHM alleged that it “entered into a 

Loan Agreement (a second mortgage) with the Illinois Borrowers 

in the amount of $400,000” and that it “was a one-year loan that 

matured on December 31, 2014, which required only monthly 

interest payments.”

The Illinois Borrowers made monthly interest payments on 

the loan through 2014, but did not repay the principal when it 

became due on December 31, 2014. Throughout 2015 Katz and 

Bernstein persuaded JHM not to foreclose on the property by 

assuring JHM it would recover the principal amount of the loan. 

Katz and Bernstein stated the Illinois Borrowers were about to 

sell the property, were in escrow to sell the property, or had a 

signed letter of intent to sell the property, none of which was 

true. According to JHM, the Rodeo Capital Group also gave the 

Illinois Borrowers “extensions” without JHM’s prior consent. 

JPMorgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497, 507, 

fn. 2, disapproved on another ground in Yvanova v. New Century 

Mortgage Corp. (2016) 62 Cal.4th 919, 939.)
5

In approximately May 2017 the Illinois Borrowers stopped 

making monthly interest payments. Katz and Bernstein 

continued to discourage JHM from foreclosing by making false 

representations about a pending sale or refinance. JHM learned 

the anchor tenant had not been paying rent for some time, had 

defaulted on its lease, had vacated the premises, and owed

creditors hundreds of thousands of dollars. Katz and Bernstein 

allegedly knew the anchor tenant was “a shell limited liability 

company with no assets” whose parent company had not 

guaranteed the lease, but they did not reveal that information 

before JHM agreed to make the loan. At some point JHM also 

learned the Illinois Borrowers had fallen behind on property tax 

payments beginning in 2015 and owed almost $2 million in taxes 

by the end of 2018. The loss of the anchor tenant, together with 

the unpaid taxes, reduced the value of the property to less than

$3,500,000. 

Unbeknownst to JHM, in March 2017 Rodeo Capital and 

the Senior Investors entered into a settlement agreement with 

the Illinois Borrowers and took possession of the property 

without assuming responsibility for JHM’s second mortgage. In 

June 2018 Rodeo Capital and the Senior Investors filed a 

foreclosure action in Illinois to extinguish JHM’s mortgage. 

B. JHM Files This Action Against the Rodeo Capital 

Group and the Senior Investors, Who File a Special 

Motion To Strike Under Section 425.16

JHM sued the Rodeo Capital Group and the Senior 

Investors for intentional misrepresentation, concealment, 

promissory fraud, and negligent misrepresentation, and Rodeo 

Capital only for breach of fiduciary duty and negligence. JHM
6

alleged the Rodeo Capital Group and the Senior Investors 

misrepresented certain material facts and omitted others to 

induce JHM to lend the Illinois Borrowers $400,000, failed to 

disclose material information about the property, misrepresented

certain material facts and concealed others to persuade JHM not 

to foreclose on the property when JHM could have recouped its 

investment, secretly entered into a settlement agreement with 

the Illinois Borrowers, and sought to extinguish JHM’s interest 

in the property through a foreclosure action. JHM alleged that,

at all relevant times, Katz and Bernstein acted as 

“owners/representatives” of Rodeo Capital and as agents for the 

Senior Investors. JHM sought damages for inducing JHM to 

invest in the Illinois property, failing to repay JHM’s loan, and 

convincing JHM under false pretenses to “forbear from 

foreclosing” on the Illinois property.

The Rodeo Capital Group and some of the Senior Investors

filed a special motion to strike certain allegations in the

complaint under section 425.16, subdivision (e)(2).

2 In particular, 

2 The Senior Investors that JHM named as defendants 

included Rodeo Capital, HIF Lenders II, Inc., Edwin H. Bernstein 

and Jeanne C. Bernstein in their representative capacities as 

trustees of the E&J Bernstein Revocable Trust, Jacqueline Davis 

in her representative capacity as trustee of the Jacqueline Davis 

Living Trust, Gary I. Jubas and Jo Ann Jubas in their 

representative capacities as trustees of the Gary I. Jubas and Jo 

Ann Jubas Revocable Trust dated February 11, 1997, Marvin

Jubas in his representative capacity as trustee of the Jubas 

Living Trust, Katz, as trustee of the Katz Lending 401K Plan, 

and Rava Capital, Inc. Rodeo Capital, Katz as trustee of the Katz 

Lending 401K Plan, HIF Lenders II, Inc., and Rava Capital, Inc. 

joined Katz and Bernstein’s special motion to strike. JHM
7

the moving defendants asked the trial court to strike the 

allegations in paragraphs 45-47, 87, 97, 102, 119, and part of 

paragraph 75. These are those allegations: 

In paragraph 45 JHM alleged the defendants’ “ultimate 

violation of . . . trust” occurred when the Rodeo Capital Group 

and the Senior Investors “filed a foreclosure action seeking to 

extinguish [JHM’s] second mortgage despite years of persuading 

[JHM] not to foreclose, and all the statements made to induce 

[JHM] to loan the $400,000 to the Illinois Borrower[s], 

specifically that they were all in this together and would not seek 

to wipe out the second mortgage.” In paragraph 46 JHM 

provided information about the foreclosure action that sought to 

extinguish JHM’s mortgage and alleged the Rodeo Capital Group 

and the Senior Investors secretly entered into a settlement 

agreement and a “deed in lieu” with the Illinois Borrowers after 

attempting unsuccessfully to negotiate “an intercreditor 

agreement” with JHM. In paragraph 47 JHM, after 

summarizing its allegations in paragraphs 45 and 46, alleged the 

Rodeo Capital Group and the Senior Investors’ conduct was “the 

height of duplicity and deception.” 

In paragraph 87 JHM alleged, in connection with its

cause of action for concealment, it would have foreclosed on the 

property in 2014 or 2015 had the Rodeo Capital Group and the 

Senior Investors disclosed that the property taxes were in arrears 

and that the anchor tenant was not paying rent. In 

paragraph 97 JHM alleged, in connection with its cause of 

alleged causes of action against other defendants who have not 

appeared in the action or who were involved in a Florida real 

estate investment unrelated to the Illinois property, none of 

whom is a party to this appeal. 
8

action for promissory fraud, the Rodeo Capital Group and the 

Senior Investors repeatedly promised JHM “it would get paid 

back [its] $400,000 investment” but “did not perform the 

promised acts, as evidenced by” the filing of a foreclosure action 

that sought to extinguish JHM’s mortgage. In paragraph 102

JHM alleged, in connection with its cause of action for negligent 

misrepresentation, the Rodeo Capital Group and the Senior 

Investors “made certain representations to [JHM] to induce it to 

forbear from foreclosing on the Property.” And in 

paragraph 119 JHM alleged, in connection with its cause of 

action for breach of fiduciary duty, Rodeo Capital “knowingly 

acted against [JHM’s] interests in connection with persuading 

[JHM] not to foreclose on the Illinois Property . . . .” 

Finally, the allegation in paragraph 75 that the moving 

defendants asked the trial court to strike was that, in connection 

with JHM’s cause of action for intentional misrepresentation, the 

Rodeo Capital Group and the Senior Investors “made certain 

representations to [JHM] to induce it to forbear from foreclosing 

on the Illinois Property.” The Rodeo Capital Group and the 

Senior Investors did not challenge the allegations in 

paragraph 75 concerning statements or omissions about the joint 

nature of the first and second loans (the “friendly first 

allegation”), the inflated appraisal, or the creditworthiness of the 

anchor tenant. 

The moving defendants argued the allegations they were 

challenging in the special motion to strike sought “to impose 

liability . . . for commencing a legal action for judicial foreclosure 

and/or for pre-litigation communications, for which they are 

insulated from liability” under Civil Code section 47, 

subdivision (b). The moving defendants argued JHM’s alleged 
9

damages were based entirely on the harm JHM claimed it 

suffered “by refraining from foreclosing and by [the Rodeo Capital 

Group and the Senior Investors] pursuing a judicial foreclosure 

on the Illinois Property.” Without any analysis or substantive 

supporting declarations, the moving defendants argued that 

JHM’s claims arose from protected activity under section 425.16 

and that the litigation privilege under Civil Code section 47, 

subdivision (b), provided “complete immunity” from liability for 

misleading JHM “into refraining from foreclosing or from the 

judicial foreclosure proceedings commenced by [the Rodeo Capital 

Group and the Senior Investors].”

JHM opposed the special motion to strike, arguing its 

claims did not arise from protected activities under section 

425.16. JHM argued that its causes of action arose instead from 

statements and omissions Katz and Bernstein made years before 

the Rodeo Capital Group and the Senior Investors filed their 

foreclosure action and that references to the Illinois foreclosure 

action only provided “‘context, without supporting a claim for 

recovery.’” (Baral v. Schnitt (2016) 1 Cal.5th 376, 394 (Baral).)

JHM also argued the moving defendants failed to show JHM’s

causes of action arose from statements made in anticipation of 

litigation. In their reply, the moving defendants argued that 

“both the act of convincing [JHM] not to foreclose and the 

commencement of a foreclosure proceeding are protected 

activities” and that section 425.16 “applies to all activities in 

connection with litigation.” JHM’s “sole theory of damages,”

according to the moving defendants, “consists of the claim that 

defendants undermined the value of JHM’s collateral by first 

convincing JHM not to foreclose, and then commencing a judicial 

foreclosure that will, if successful, eliminate JHM’s lien.”
10

C. The Trial Court Grants in Part and Denies in Part

the Special Motion To Strike

The trial court granted in part and denied in part the 

special motion to strike. The court broadly characterized the 

challenged allegations as pertaining to (1) the defendants’ act of 

filing a foreclosure action that sought to eliminate JHM’s lien on 

the Illinois property (paragraphs 45-47 and 97); and (2) the 

defendants’ misrepresentations and omissions that caused JHM 

to refrain from filing a foreclosure action in Illinois

(paragraphs 75, 87, 102, and 119). The court further divided the 

second category of allegations (regarding forbearance) into 

allegations of affirmative misrepresentations (there was no need 

to foreclose because the defendants would ensure JHM was 

repaid) and those of omissions (JHM would have foreclosed when 

it had the chance had it known about the unpaid property taxes 

and the problems with the anchor tenant). 

Under the first step of the section 425.16 analysis the trial 

court ruled JHM’s allegations concerning the filing of the 

foreclosure action by the defendants did not arise from protected 

activity. The court stated that “a close reading of the Complaint 

indicates that [JHM’s] claims do not seek relief for Defendants’

filing of a foreclosure action.” For example, the court pointed out, 

JHM’s third cause of action for promissory fraud sought damages 

because the borrowers failed to repay the $400,000 loan, not 

because the defendants foreclosed on the property. “This makes 

sense,” the court reasoned, “to the extent that the presence or 

absence of a lien does not fundamentally relate to the borrowers’

obligation to [JHM].”

But the trial court ruled that affirmative

misrepresentations that caused JHM to refrain from filing a 
11

foreclosure action were protected statements made by a senior 

lender in anticipation of litigation. The court concluded that the 

alleged omission concerning the payment of property taxes was 

protected activity because Rodeo Capital had a duty as the loan 

servicer to disclose that information, but that the alleged 

omission concerning the anchor tenant was not protected activity 

because Rodeo Capital did not have a duty to disclose that 

information. 

Under the second step of the section 425.16 analysis, the 

trial court ruled “the allegations that Defendants made certain 

misrepresentations and omitted the fact that property taxes had 

not been paid in order to preclude a foreclosure action are barred 

by the litigation privilege” for the same reasons that those 

misrepresentations and omissions constituted protected activity. 

JHM filed a timely appeal, and the moving defendants filed a 

timely cross-appeal. 

DISCUSSION

A. Section 425.16

“A strategic lawsuit against public participation . . . is one 

which ‘seeks to chill or punish a party’s exercise of constitutional 

rights to free speech and to petition the government for redress of 

grievances.’” (Contreras v. Dowling (2016) 5 Cal.App.5th 394, 

404; see Rand Resources, LLC v. City of Carson (2019) 6 Cal.5th 

610, 619 (Rand Resources) [“‘participation in matters of public 

significance . . . should not be chilled through abuse of the 

judicial process’”].) Section 425.16 “provides a procedural remedy 

to dispose of lawsuits that are brought to chill the valid exercise 

of constitutional rights.” (Contreras, at p. 404; see Rand 
12

Resources, at p. 619; Trinity Risk Management, LLC v. Simplified 

Labor Staffing Solutions, Inc. (2021) 59 Cal.App.5th 995, 1003

(Trinity Risk Management) [“The Legislature enacted section 

425.16 to prevent and deter ‘lawsuits brought primarily to chill 

the valid exercise of the constitutional rights of freedom of speech 

and petition for the redress of grievances.’”].) “The statute 

‘authorizes a defendant to file a special motion to strike any 

cause of action arising from an act in furtherance of the 

defendant’s constitutional right of petition or free speech in 

connection with a public issue.’” (Contreras, at p. 404; see Barry 

v. State Bar of California (2017) 2 Cal.5th 318, 321.) And the 

Legislature has instructed that the statute “‘be construed 

broadly.’” (Rand Resources, at p. 619; see § 425.16, subd. (a).)

A special motion to strike under section 425.16 may be used 

to attack entire causes of action or “parts of a count as pleaded.” 

(Baral, supra, 1 Cal.5th at p. 393; see Kettler v. Gould (2018) 

22 Cal.App.5th 593, 600.) The “distinctive two-part structure”

applies in either circumstance. (Rand Resources, supra, 6 Cal.5th 

at p. 619; see Baral, at p. 396.) “At the first step, the moving 

defendant bears the burden of identifying all allegations of 

protected activity, and the claims for relief supported by them. 

When relief is sought based on allegations of both protected and 

unprotected activity, the unprotected activity is disregarded at 

this stage.” (Baral, at p. 396.) “Allegations of protected activity 

that merely provide context, without supporting a claim for 

recovery, cannot be stricken under [section 425.16].” (Baral, at 

p. 394; see Oakland Bulk & Oversized Terminal, LLC v. City of 

Oakland (2020) 54 Cal.App.5th 738, 753 (Oakland Bulk)

[“‘“collateral or incidental allusions to protected activity will not 

trigger”’” application of section 425.16].) “[T]he focus is on 
13

determining what ‘the defendant’s activity [is] that gives rise to 

his or her asserted liability—and whether that activity 

constitutes protected speech or petitioning.’” (Park v. Board of 

Trustees of California State University (2017) 2 Cal.5th 1057, 

1063 (Park); see Oakland Bulk, at p. 753.)

“If the court determines that relief is sought based on 

allegations arising from activity protected by the statute, the 

second step is reached. There, the burden shifts to the plaintiff to 

demonstrate that each challenged claim based on protected 

activity is legally sufficient and factually substantiated. The 

court, without resolving evidentiary conflicts, must determine 

whether the plaintiff’s showing, if accepted by the trier of fact, 

would be sufficient to sustain a favorable judgment. If not, the 

claim is stricken. Allegations of protected activity supporting the 

stricken claim are eliminated from the complaint, unless they 

also support a distinct claim on which the plaintiff has shown a 

probability of prevailing.” (Baral, supra, 1 Cal.5th at p. 396; see 

Kettler v. Gould, supra, 22 Cal.App.5th at p. 601.) 

We review de novo an order granting or denying a special 

motion to strike under section 425.16. (Park, supra, 2 Cal.5th at 

p. 1067; Trinity Risk Management, supra, 59 Cal.App.5th at 

p. 1002.) “‘[O]ur job is to review the trial court’s ruling, not its 

reasoning.’ [Citation.] We consider ‘the pleadings, and 

supporting and opposing affidavits stating the facts upon which 

the liability or defense is based.’ [Citation.] In considering the 

pleadings and declarations, we do not make credibility 

determinations or compare the weight of the evidence; instead, 

we accept the opposing party’s evidence as true and evaluate the 

moving party’s evidence only to determine if it has defeated the 
14

opposing party’s evidence as a matter of law.” (Trinity Risk 

Management, at pp. 1002-1003; see Park, at p. 1067.) 

B. The Challenged Allegations Do Not Arise from 

Protected Petitioning Activity 

1. Applicable Law

Section 425.16, subdivision (e), describes four types of 

communications or conduct that constitute acts in furtherance of 

a person’s right of speech or petition, including “any written or 

oral statement or writing made before a legislative, executive, or 

judicial proceeding, or any other official proceeding authorized by 

law” and “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.” (§ 425.16, subd. (e)(1), (2); see 

Rand Resources, supra, 6 Cal.5th at p. 620; Trinity Risk 

Management, supra, 59 Cal.App.5th at p. 1003.) “‘[J]ust 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,’” such “‘statements are equally entitled 

to the benefits of section 425.16.’” (Briggs v. Eden Council for 

Hope & Opportunity (1999) 19 Cal.4th 1106, 1115; see Trinity 

Risk Management, supra, 59 Cal.App.5th at pp. 1004-1005;

Bel Air Internet, LLC v. Morales (2018) 20 Cal.App.5th 924, 940

(Bel Air Internet).) But a “prelitigation communication is 

privileged only if it ‘relates to litigation that is contemplated in 

good faith and under serious consideration.’” (Trinity Risk 

Management, at p. 1005; see Kettler v. Gould, supra,

22 Cal.App.5th at p. 608.)
15

“In determining whether a statement was made in 

anticipation of litigation contemplated in good faith and under 

serious consideration, [the] court may look to how this test has 

been applied in cases involving the litigation privilege of Civil 

Code section 47.” (Bailey v. Brewer (2011) 197 Cal.App.4th 781, 

790; accord, Kettler v. Gould, supra, 22 Cal.App.5th at 

pp. 607-608; Bel Air Internet, supra, 20 Cal.App.5th at p. 941.) In 

such cases, “‘the “mere possibility or subjective anticipation” of 

litigation is insufficient’” to demonstrate litigation contemplated 

in good faith and under serious consideration. (Strawn v. Morris, 

Polich & Purdy, LLP (2019) 30 Cal.App.5th 1087, 1095-1096; see 

Edwards v. Centex Real Estate Corp. (1997) 53 Cal.App.4th 15, 35 

(Edwards).) Instead, there must be “‘proof of “some actual 

verbalization of the danger that a given controversy may turn 

into a lawsuit.”’” (Strawn, at p. 1096; see Edwards, at p. 35.) 

Courts considering whether a prelitigation statement is 

privileged under Civil Code section 47, subdivision (b), also 

consider whether litigation was imminent or contemplated at the 

time the statements are made. (See Strawn, at p. 1096; 

Edwards, at pp. 35-36; see also Neville v. Chudacoff (2008) 

160 Cal.App.4th 1255, 1268-1269 [discussing imminency].)

“‘Although “[t]he classic example of an instance in which the 

privilege would attach to prelitigation communications is the 

attorney demand letter threatening to file a lawsuit if a claim is 

not settled,” it is not the mere threat of litigation that brings the 

privilege into play, but rather the actual good faith contemplation 

of an imminent, impending resort to the judicial system for the 

purpose of resolving a dispute. [Citation.] “[B]ecause the 

privilege does not attach prior to the actual filing of a lawsuit 

unless and until litigation is seriously proposed in good faith for 
16

the purpose of resolving the dispute, even a threat to commence 

litigation will be insufficient to trigger application of the privilege 

if it is actually made as a means of inducing settlement of a 

claim, and not in good faith contemplation of a lawsuit.”’” 

(Strawn, at p. 1096; see Eisenberg v. Alameda Newspapers, 

Inc. (1999) 74 Cal.App.4th 1359, 1379-1380.)

2. JHM Does Not Seek Relief Based on the Illinois 

Foreclosure Action

The moving defendants argue the trial court erred in

denying their special motion to strike paragraphs 45-47 and 97, 

which they contend allege harm arising from the filing of the 

foreclosure action in Illinois. But the trial court correctly

distinguished between “‘“(1) speech or petitioning activity that is 

mere evidence related to liability and (2) liability that is based 

on speech or petitioning activity.”’” (Area 51 Productions, Inc. v. 

City of Alameda (2018) 20 Cal.App.5th 581, 594; see Oakland 

Bulk, supra, 54 Cal.App.5th at p. 753.) JHM did not sue the 

Rodeo Capital Group and the Senior Investors for filing a 

foreclosure action, which would be protected petitioning activity.

JHM sued them for inducing JHM to loan the Illinois Borrowers 

$400,000 under the false pretense of a “friendly first,” which is 

not protected petitioning activity, and the foreclosure action filed 

in Illinois is evidence the Rodeo Capital Group and the Senior 

Investors reneged on their promise. Indeed, JHM’s causes of 

action and damages do not depend on whether the Rodeo Capital

Group and the Senior Investors ever filed the foreclosure action; 

JHM would have lost its investment either way. The foreclosure 

action does not underlie or form the basis for the challenged 

allegations (see Park, supra, 2 Cal.5th at p. 1062; Oakland Bulk, 
17

supra, 54 Cal.App.5th at p. 753), and instead only provides 

“context” for JHM’s claims “without supporting a claim for 

recovery” (Baral, supra, 1 Cal.5th at p. 394; see Oakland Bulk, at 

p. 753). In other words, that the Illinois foreclosure action “may 

have triggered a lawsuit” does not mean JHM’s causes of action

arose from protected activity. (Third Laguna Hills Mutual v. 

Joslin (2020) 49 Cal.App.5th 366, 373; accord, ValueRock 

TN Properties, LLC v. PK II Larwin Square SC LP (2019) 

36 Cal.App.5th 1037, 1047; see Episcopal Church Cases (2009) 

45 Cal.4th 467, 477-478 [“the mere fact that an action was filed 

after protected activity took place does not mean the action arose 

from that activity for the purposes of [section 425.16]”].) Thus, 

the trial court did not err in denying the part of the special 

motion to strike targeting paragraphs 45-47 and 97 that the 

moving defendants contend the court erred in denying.

3. The Challenged Misrepresentations and 

Omissions Are Not Protected Prelitigation 

Statements

JHM argues the trial court erred in granting the special 

motion to strike the allegations of affirmative representations 

Katz and Bernstein made to persuade JHM not to foreclose on 

the Illinois property (essentially, “we’ll make sure you get your 

money back”) and omissions regarding the payment of property 

taxes. Conversely, the moving defendants argue the trial court 

erred in denying the special motion to strike the allegations of

omissions concerning the anchor tenant’s lease payments. We 

conclude the moving defendants failed to carry their burden to 

show any of the alleged misrepresentations or omissions were 

protected prelitigation statements under section 425.16, which 
18

means that, on both issues, JHM is right and the moving 

defendants are wrong.

JHM in its complaint did not allege that it or any other 

person or entity ever affirmatively threatened to foreclose on the 

Illinois property or to file a declaratory relief action or any other 

litigation to determine the rights and interests of the various 

parties. JHM also did not allege that it ever retained an attorney 

to file a foreclosure action or to threaten to foreclose or that JHM 

ever received a communication from any attorney representing 

any of the defendants regarding the Illinois property. Similarly, 

in his declaration in opposition to the special motion to strike, 

Jason Mitchell, JHM’s principal, stated that he “was persuaded 

by Katz and Bernstein not to foreclose” and that he “would have”

foreclosed on the property had he known the truth about the 

property’s value. The only indication JHM actually considered 

foreclosing on the property is implied from a sentence in

Mitchell’s declaration stating he relied on the alleged 

misrepresentations and omissions “in deciding not to foreclose 

. . . in 2015.” None of the moving defendants provided a 

declaration in support of the special motion to strike, and none 

submitted any evidence other than an order granting a motion for 

entry of default entered by an Illinois court in the foreclosure 

action.

The moving defendants did not show JHM’s allegations 

that their misrepresentations and omissions caused JHM to 

refrain from filing a foreclosure action, allegations we assume are 

true, were made in anticipation of litigation contemplated in good 

faith and under serious consideration. “In order for [defendants] 

to be able to take advantage of the [litigation] privilege by 

applying it to their own communications, they must establish 
19

that at the time they made the subject communications, they 

themselves actually contemplated prospective litigation, seriously 

and in good faith.” (Edwards, supra, 53 Cal.App.4th at p. 39; see

Strawn v. Morris, Polich & Purdy, LLP, supra, 30 Cal.App.5th at 

p. 1096; Cornell v. Berkeley Tennis Club (2017) 18 Cal.App.5th 

908, 948; Eisenberg v. Alameda Newspapers, Inc. (1999) 

74 Cal.App.4th 1359, 1380; see also Bel Air Internet, supra,

20 Cal.App.5th at p. 944 [“Whether or not a person intends to 

exercise his or her constitutional right to petition the government 

by persuading another to file [or not to file] a lawsuit depends 

upon the state of mind of the person offering the persuasion, not 

the state of mind of the person whom he or she attempts to 

persuade.”].) 

For example, in Edwards, supra, 53 Cal.App.4th 15, a case 

strikingly similar to this one, a homeowners’ association sued a 

developer and its insurer for fraudulently inducing the 

homeowners to release the developer from liability in exchange 

for making repairs to cracks in the foundations of the plaintiffs’

homes. (Id. at pp. 25-27.) The defendants filed a motion in 

limine to exclude under Civil Code section 47, subdivision (b), the 

defendants’ prelitigation communications as evidence they had 

fraudulently induced the homeowners to execute the releases. 

(Edwards, at pp. 25-26.) The court in Edwards reversed an order 

granting the motion in limine. The court stated: “[The 

homeowners] merely alleged that [the defendants] intended, by 

means of fraudulent misrepresentations and omissions, to protect 

themselves from potential liability by inducing [the homeowners]

not to pursue their rightful judicial remedies. [The homeowners]

have never alleged or admitted that at the time they informed 

[the developer] of the cracks in their foundations, [the 
20

homeowners] themselves were actually contemplating litigation, 

seriously and in good faith. . . . [¶] . . . The allegations of [the]

complaints only state that [the defendants] were trying to avoid

potential litigation by acting in a way that would induce [the 

homeowners] not to pursue or even consider filing lawsuits until 

the statute of limitations had already run. Nowhere in their 

complaints do [the homeowners] allege [the defendants]

contemplated anything more than the mere possibility that [the 

homeowners] might consider litigation.” (Id. at p. 39; see Cornell 

v. Berkeley Tennis Club, supra, 18 Cal.App.5th at p. 948

[defendant “identified no evidence that the allegedly defamatory 

statements were made when [the defendant] contemplated 

litigation in good faith”]; Eisenberg v. Alameda Newspapers, Inc., 

supra, 74 Cal.App.4th at p. 1380 [litigation privilege did not 

protect as a prelitigation statement a retraction that was 

published “not to obtain access to the courts, but to avoid

litigation”].) Here, as with the defendants in Edwards, the 

moving defendants pointed to no evidence that, at the time they 

made the alleged misrepresentations and omissions, they 

actually contemplated litigation in good faith and under serious 

consideration.

The court in Edwards further stated that “the [litigation] 

privilege only arises at the point in time when litigation is no 

longer a mere possibility, but has instead ripened into a proposed 

proceeding that is actually contemplated in good faith and under 

serious consideration as a means of obtaining access to the courts 

for the purpose of resolving the dispute.” (Edwards, supra, 

53 Cal.App.4th at p. 39.) This requirement prevents the 

litigation privilege from being used “‘as a cloak to provide 

immunity’ for fraud and other tortious conduct.” (Id. at p. 33; 
21

accord, Cornell v. Berkeley Tennis Club, supra, 18 Cal.App.5th at 

p. 947; see Olivares v. Pineda (2019) 40 Cal.App.5th 343, 357 [“a 

threat to file a lawsuit is insufficient to activate the privilege if it 

is merely a negotiating tactic and not a serious proposal made in 

good faith contemplation of going to court”].) Here, JHM did not 

even allege there was a dispute with the Rodeo Capital Group or 

the Senior Investors at the time Katz and Bernstein made 

misrepresentations and omissions to induce JHM not to foreclose 

on the Illinois property. Instead, JHM alleged it believed JHM, 

the Rodeo Capital Group, and the Senior Investors “were all in 

this together.” The moving defendants failed to show litigation 

was anything more than a “mere possibility,” if that. (Edwards, 

at p. 39; see id. at p. 38 [“it is not clear from the record that there 

was even a ‘dispute’ to be resolved before [the defendants]

demanded that [the homeowners] execute the releases as a 

condition of repairing the foundations”].) 

Finally, the policy underlying the litigation privilege is not 

served by applying section 425.16 to the misrepresentations and 

omissions at issue in this case. “‘The principal purpose of [the

litigation privilege] is to afford litigants and witnesses [citation] 

the utmost freedom of access to the courts without fear of being 

harassed subsequently by derivative tort actions.’” (Action 

Apartment Assn., Inc. v. City of Santa Monica (2007) 

41 Cal.4th 1232, 1241; accord, Trinity Risk Management, supra,

59 Cal.App.5th at p. 1006.) This purpose is not served by 

protecting “[n]egotiations and persuasion [that] are part of any 

business deal.” (Haneline Pacific Properties, LLC v. May (2008) 

167 Cal.App.4th 311, 320; see Mission Beverage Co. v. Pabst 

Brewing Co., LLC (2017) 15 Cal.App.5th 686, 703-704 [letter 

communicating a decision to terminate a contract was not 
22

protected pre-arbitration activity because the sender “had ‘no 

reason to believe’ that arbitration ‘will follow’ from its letter 

because [the parties] could well have negotiated a settlement and 

obviated any need for arbitration”].) “To suggest that nearly any

attempt at negotiation is covered by the privilege . . . is unduly 

overbroad.” (Haneline, at p. 320; see Eisenberg v. Alameda 

Newspapers, Inc., supra, 74 Cal.App.4th at p. 1381 [applying the 

litigation privilege to settlement negotiations when litigation is a 

mere possibility “is totally unrelated to the rationale underlying 

the litigation privilege”].) Katz and Bernstein hoped to forestall 

any effort by JHM to foreclose on the Illinois property by 

persuading JHM it would get its money back and by withholding 

material information about the property. There was no 

allegation or evidence that Katz or Bernstein contemplated any 

litigation (much less seriously or in good faith) at the time they 

made the challenged misrepresentations and omissions. Thus, 

JHM’s causes of action arising from those alleged 

misrepresentations and omissions did not restrict any party’s 

freedom of access to the courts. Thus, the trial court erred in 

granting the part of the special motion to strike JHM contends

the court erred in granting, and it did not err in denying the part 

of the motion to strike allegations regarding the omission of 

information regarding the anchor tenant. 
23

DISPOSITION

The order granting in part and denying in part the special 

motion to strike certain allegations of the complaint is reversed. 

The trial court is directed to enter a new order denying the 

special motion to strike. JHM is to recover its costs on appeal. 

SEGAL, J.

We concur:

PERLUSS, P. J.

FEUER, J.