21-Day Safe Harbor Provision Does Not Apply to Fee Request in Opposing Frivolous Anti-SLAPP Motion

Stephen L. Raucher

In Changsha Metro Grp. Co., Ltd. v. Xufeng, 57 Cal. App. 5th 1 (2020), the Court of Appeal, Fourth Appellate District, clarified that the “safe harbor” provision of Code of Civil Procedure Section 128.5 does not apply where attorney’s fees are sought by a party opposing an anti-SLAPP motion which the court finds to have been frivolous.

The trial court found that Defendants Peng Xufeng and Jia Siyu filed a frivolous anti-SLAPP motion against Changsha Metro Group Co., Ltd.  The trial court then ordered Defendants to pay Changsha $61,915 for Changsha’s attorney’s fees in opposing the anti-SLAPP motion.  Defendants appealed, arguing (1) that they were not given a 21-day safe harbor period within which to withdraw their motion, and (2) Changsha requested attorney’s fees in its opposition to the anti-SLAPP motion, rather than in a separate motion.  Defendants appealed and the Court of Appeal affirmed.

The anti-SLAPP statute states that, if an anti-SLAPP motion is frivolous, then “the court shall award costs and reasonable attorney’s fees to a plaintiff prevailing on the motion, pursuant to Section 128.5.”  Code of Civil Procedure § 425.16(c)(1).  However, the anti-SLAPP statute also requires that the hearing on the motion be scheduled not more than 30 days after service.  Code of Civil Procedure § 425.16(f).

Code of Civil Procedure § 128.5(a) states, “A trial court may order a party, the party’s attorney, or both, to pay the reasonable expenses, including attorney’s fees, incurred by another party as a result of actions or tactics, made in bad faith, that are frivolous or solely intended to cause unnecessary delay.”  Moreover, Section 128.5(c) states, “Expenses pursuant to this section shall not be imposed except on notice contained in a party’s moving or responding papers or, on the court’s own motion, after notice and opportunity to be heard.”  Therefore, attorney’s fees may be awarded as expenses, and expenses may be requested in a party’s responding papers, which is what Changsha did.

In regards to Defendants’ arguments, Code of Civil Procedure § 128.5(f) authorizes the trial court to impose sanctions, which can include attorney’s fees, if (1) the motion is “made separately from other motions or requests,” and (2) a 21-day safe harbor notice is served if the offending document can be withdrawn or corrected.  Code of Civil Procedure § 128.5(f)(1)(A) & (B).  However, the Court found that subdivision (f), which requires an order under subdivision (a), is not compatible with subdivision (c), reasoning that “If one obtains an order under subdivision (a), then the safe harbor provision of subdivision (f) is rendered meaningless because it will be impossible to withdraw a motion or pleading that has already been found to be frivolous or not under subdivisions (a) and (c).”  Id. at 11-12.  Moreover, the 21-day safe harbor provision is incompatible with the requirement that an anti-SLAPP motion be heard within 30 days of service.

After analyzing the statutes and reviewing the relevant legislative history, the Court concluded that subdivision (f) does not work with the anti-SLAPP statute.  Accordingly, the Court held “that if it is not possible to comply with the safe harbor and separate motion requirements of subdivision (f) when seeking attorney’s fees, then one should use the procedures set forth in subdivisions (a) and (c).”  Id. at 18.  The Court further concluded, “when it is not practical to apply the safe harbor provision then it need not be used.”  Ibid.  Thus, a party seeking sanctions under Section 128.5 for opposing a frivolous anti-SLAPP motion may simply seek attorney’s fees as part of its opposition, without complying with the 21-day safe harbor procedure.

RRB Scores Victory in District Court Class Action Suit

On October 27, 2020, USDC Judge James Donato struck down a California plaintiff’s bid to represent non-Californians in a nationwide class alleging that O Organics LLC’s kombucha drinks mislead consumers about their alcohol content.  Reuben Raucher & Blum successfully defended O Organics in demonstrating the significant differences between California consumer protection laws and consumer protection laws in other states which would make a nationwide class untenable.  The decision was published in a Law360 article entitled “Nationwide Class Struck From Kombucha False Ad Suit”.

Legal Issues in the Age of COVID-19: Employment and Insurance

On Tuesday, April 7, 2020, Stephen L. Raucher was a panelist presenting an MCLE webinar through BHBA entitled “Legal Issues in the Age of COVID-19: Employment and Insurance” (video in link).   This was part 1 of a 3 part series examining existing and new employment laws to be aware of in the wake of the COVID-19 pandemic.  Possible insurance coverages were also discussed.

The Ever-Evolving World of Anti-SLAPP

On Monday, June 24, 2019, Stephen L. Raucher was one of the panelists presenting a BHBA continuing legal education program entitled “The Ever-Evolving World of Anti-SLAPP.”  The program covered various topics and examined the most important developments in the world of Anti-SLAPP motions, including several new California Supreme Court cases.

Good News and Bad News for Insurance Company Attorneys

Stephen L. Raucher

The recent appellate case Strawn v. Morris, Polich & Purdy LLP, 30 Cal. App. 5th 1087 (2019), examined an insurance company attorney’s potential liability in the context of the litigation privilege and elder abuse claims, resulting in a mixed ruling.

Dennis and Diane Strawn’s home and vehicle were destroyed by a fire in 2009.  The Strawns immediately notified State Farm about the incident and filed a claim.  Dennis Strawn was prosecuted for arson relating to the fire, but the case was dismissed on February 19, 2013.  In August of 2015, State Farm denied the Strawn’s claim on the grounds that Dennis had intentionally set the fire and that Diane Strawn had concealed evidence of that wrongful conduct.

In August of 2016, the Strawns filed a complaint against State Farm and its attorneys.  The claims against State Farm’s attorney Douglas K. Wood (“Wood”), and his law firm Morris, Polich & Purdy, LLP (“MPP”) for invasion of privacy and elder abuse were dismissed on demurrer by the trial court.

Invasion of Privacy Claim

The invasion of privacy claim against Wood centered on alleged misconduct involving financial records.  Throughout the claims process, State Farm requested financial records from the Strawns, including tax returns.  The Strawns refused to waive any privilege regarding these tax returns.  Instead, the Strawns authorized their accountant to give Wood records used to prepare their tax returns, but not the actual returns.  However, the accountant’s office accidentally included tax returns with the documents they produced.  The Strawns alleged that Wood then provided these tax returns to State Farm despite being expressly informed that they were privileged.

Wood and MPP claimed that their actions were protected by the litigation privilege.  The litigation privilege is not limited to statements made during a proceeding, but may extend to steps taken prior thereto, or afterwards.  Strawn, 30 Cal. App. 5th at 1094 (citing Rusheen v. Cohen, 37 Cal. 4th 1048, 1057 (2006)).  The trial court dismissed the invasion of privacy claim based on this privilege.

However, on appeal, the Court found that there was a factual question as to whether Wood’s communication of the tax returns was related to litigation contemplated in good faith and under serious consideration.  The Court noted that a mere threat of litigation will not suffice for a claim of the litigation privilege, but, rather, good faith contemplation of an imminent resort to the judicial system is required.  Since no litigation was instituted until nearly a year after the claim was denied, there was a question as to whether the “imminence” element of the privilege was satisfied.  Otherwise, virtually every insurance claim investigation could be covered by the litigation privilege.  Accordingly, the Court reversed the order sustaining the demurrer to the cause of action for invasion of privacy against Wood and MPP.

Elder Abuse Claim

The basis of the elder abuse claim against Wood and MPP was that they helped State Farm wrongfully deny the Strawn’s insurance claim by supplying State Farm with privileged tax returns.  This claim by the Strawns was an attempt to circumvent a rule stating that an insurer’s agents cannot be found liable for a bad faith denial of coverage.  Gruenberg v. Aetna Ins. Co., 9 Cal. 3d 566, 576 (1973).

The Court upheld the dismissal of this claim because Gruenberg and the legislative history of the Elder Abuse Act show no intent to impose liability on an attorney acting on behalf of an insurer for the insurer’s bad faith denial of coverage.  An attorney is not a party to the insurance agreement, and therefore is not subject to an implied duty of good faith and fair dealing regarding an insurance claim.

Fifth Annual Update On Developments In Insurance

On Monday, April 15, 2019, Stephen L. Raucher was one of the panelists presenting a continuing legal education program entitled “Fifth Annual Update on Developments in Insurance.” The program examined the most important new cases from 2018 regarding insurance coverage and bad faith, focusing particularly on liability and property policies.