People v. Rutherford CA4/2 ( 2020 )

Filed 12/23/20 P. v. Rutherford CA4/2
See concurring opinion
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION TWO
THE PEOPLE,
Plaintiff and Appellant, E073700
v. (Super.Ct.No. RIC1902577)
JAMES RUTHERFORD et al., OPINION
Defendants and Respondents.
APPEAL from the Superior Court of Riverside County. Sunshine S. Sykes, Judge.
Affirmed.
Michael A. Hestrin, District Attorney, Emily R. Hanks and Timothy S. Brown,
Deputy District Attorneys, for Plaintiff and Appellant.
The Civil Justice Association of California and Fred J. Hiestand as Amicus Curiae
on behalf of Plaintiff and Appellant.
Bremer Whyte Brown & O’Meara, Benjamin L. Price and Courtney M. Serrato for
Defendants and Respondents James Rutherford and The Association for Equal Access.
1
Callahan & Blaine, Daniel J. Callahan, David J. Darnell and Drew Harbur for
Defendants and Respondents Law Offices of Babak Hashemi, Babak Hashemi, Manning
Law, Joseph R. Manning, Michael J. Manning and Craig Cote.
I. INTRODUCTION
In this civil action, the People allege in their complaint that defendants and
respondents, comprised of two litigants, two law firms, and four attorneys1 (collectively,
defendants), engaged in an unlawful business practice, in violation of the unfair
competition law (the UCL) (Bus. & Prof. Code, § 17200, et. seq.), by filing and pursuing
approximately 120 “fraudulent ADA lawsuits,” falsely accusing Riverside County
businesses and individuals of violating the Americans with Disabilities Act (the ADA)
(42 U.S.C. § 12181, et seq.), in order to extort monetary settlements from the defendants
in the ADA lawsuits. The People seek to enjoin defendants from filing and pursuing
fraudulent ADA lawsuits, along with civil penalties of not less than $1,000,000 from each
defendant, and “full restitution” to the victims of defendants’ unfair “ADA lawsuit
scheme.”
The trial court sustained defendants’ general demurrer to the People’s complaint
(Code Civ. Proc., § 430.10, subd. (e)), without leave to amend, and entered a judgment of
dismissal on the ground that the litigation privilege (Civ. Code, § 47, subd. (b)) protected
1 Defendants and respondents are James Rutherford, an individual, The
Association for Equal Access (“A4EA”), an unincorporated entity founded by
Rutherford, two law firms, The Law Offices of Babak Hashemi (“Hashemi Law”) and
Manning Law, APC (“Manning Law”), and four attorneys, Babak Hashemi, Joseph R.
Manning Jr., Michael J. Manning, and Craig Cote.
2
defendants’ communications in filing and pursuing the ADA lawsuits. In this appeal, the
People claim their UCL claim falls outside the scope of the privilege because it alleges
that defendants violated three criminal statutes, each more specific in their operation than
the privilege: Penal Code section 484 (theft by false pretenses), Penal Code section 523
(extortion by writing), and Business and Professions Code section 6128, subdivision (a)
(deceit and collusion by attorneys). The People also claim that the privilege does not
apply because they were not a party to the ADA lawsuits. We agree that the litigation
privilege applies to the People’s UCL claim, and we affirm the judgment of dismissal.
II. FACTS AND PROCEDURE
A. The Allegations of the People’s Complaint2
James Rutherford is a plaintiff in approximately 120 lawsuits, filed in federal
court, alleging ADA violations against “Riverside County individuals and/or businesses”
(the ADA lawsuits). A4EA, an unincorporated entity founded by Rutherford, is a
plaintiff in approximately 26 of the 120 ADA lawsuits in which Rutherford is also a
plaintiff. Hashemi Law, and attorney Babak Hashemi, filed the approximate 26 ADA
lawsuits in which Rutherford and A4EA are plaintiffs. Manning Law, and attorneys
Joseph R. Manning, Jr., Michael J. Manning, and Craig Cote, filed the approximate 94
ADA lawsuits in which only Rutherford is plaintiff. Manning Law “typically” files ADA
2 In keeping with our standard of review of the order sustaining the demurrer, we
assume the truth of the complaint’s well-pleaded, nonconclusory factual allegations.
(Blank v. Kirwan (1985) 39 Cal.3d 311, 318; PGA West Residential Assn. Inc. v. Hulven
Internat., Inc., (2017) 14 Cal.App.5th 156, 164, fn. 3, 168.) We summarize those factual
allegations in this section.
3
lawsuits on behalf of Rutherford, and Hashemi Law files ADA lawsuits on behalf of
Rutherford and A4EA.
Defendants have collectively filed “some 323 lawsuits”—approximately 300 in
federal court, alleging ADA violations, and approximately 23 in state court, alleging
violations of the Unruh Civil Rights Act (the Unruh Act) (Civ. Code, § 51 et seq.). The
300 federal court lawsuits also alleged violations of the Unruh Act, and include the 120
ADA lawsuits in which Rutherford, or Rutherford and A4EA, are plaintiffs.
The ADA lawsuits generally contain the “same boilerplate allegations.” Each
alleges that: Rutherford is a California resident with a qualified ADA disability (see
42 U.S.C. § 12102(2)); Rutherford attempted to visit the businesses of the defendant(s) in
the ADA lawsuits on certain dates or in given months; when Rutherford attempted to visit
the businesses, he encountered at least one “ ‘architectural barrier,’ ” for example, a non-
ADA compliant handicap parking space, signage, curb ramp, or access route; as a result
of these barriers, Rutherford was “deterred from patronizing” the businesses and
“suffered difficulty, humiliation and/or frustration”; following his first attempted visit,
and despite the architectural barriers and ADA violations, Rutherford intended to return
to the businesses in order to avail himself of their goods and services and to ensure that
they complied with the ADA. In each ADA lawsuit, Rutherford and A4EA sought
injunctive relief to remedy the ADA violations, plus “mandatory minimum” damages of
at least $4,000 for each alleged Unruh Act violation.
Rutherford did not visit any of the businesses sued in the ADA lawsuits “for good
faith purposes”; rather, he visited each business for the sole purpose of initiating a federal
4
ADA lawsuit against it. Rutherford also had no “good faith intention” to return to any of
the businesses, and he did not return to any of the businesses after the ADA lawsuit
against each business was filed. Rutherford was never “denied, by way of any
architectural barriers, full access and/or full enjoyment at any of the businesses sued” in
any of the ADA lawsuits, based on his claimed disabilities. Rutherford had been
observed “on multiple occasions, walking and ambulating without difficulty,” and
engaging in behavior “inconsistent with the claims” in the ADA lawsuits. None of the
businesses sued in the ADA lawsuits have any record of Rutherford entering their
businesses, including video evidence, purchase or appointment records, or verbal or
written complaints concerning the alleged ADA or Unruh Act violations. A4EA is
controlled by Rutherford, has “no more than a few members,” is “nothing more than a
website,” and was “used” by defendants “to increase fear and exact settlements” from the
defendants sued in the ADA lawsuits.
The complaint thus alleges that Rutherford lacked standing to file and maintain the
ADA lawsuits, and that defendants were fully aware of Rutherford’s lack of standing, and
his ability to fully ambulate without aid, when each ADA lawsuit was filed. “Defendants
colluded, conspired and/or otherwise agreed to engage in an ADA lawsuit scheme,
designed to defraud, extract and/or extort money settlements from Riverside County
individuals and businesses, based on the fraud, misrepresentations and false allegations
contained in each and every one of the federal ADA lawsuits.”
Based on defendants’ pursuit and filing of the ADA lawsuits, the complaint
alleges two causes of action against each defendant: the first for engaging in unfair
5
competition in violation of Business and Professions Code section 17200 (the UCL
claim), and the second for making false and misleading statements in violation of
Business and Professions Code section 17500. As part of its UCL claim, the complaint
alleges that, by filing and pursuing the ADA lawsuits, each defendant violated Penal
Code sections 484 (grand theft) and 523 (extortion by writing).
The complaint further alleges that Hashimi Law, Manning Law, and the four
attorney defendants3 violated Business and Professions Code sections 6106 (attorney’s
commission of any act involving moral turpitude, dishonesty, or corruption constitutes a
cause for disbarment or suspension) and 6128 (attorney deceit or collusion, with intent to
deceive the court or any party, is a misdemeanor), along with former rules 1-120 and 3-
200 of the Rules of Professional Conduct.4 The complaint seeks to enjoin defendants
from engaging in the “unlawful, unfair, and fraudulent business practices” of filing and
pursuing false ADA lawsuits; to impose a civil penalty of not less than $1,000,000 on
each defendant, and “full restitution” to the victims of defendants’ “ADA lawsuit
scheme.”
3 See footnote 1, ante.
4 References to rules are to the Rules of Professional Conduct. Former rule 3-200
prohibited a California bar member from seeking, accepting, or continuing employment if
the member knew or had reason to know that the objective of the employment was to
bring an action or assert a position in litigation without probable cause. Former rule 1-
200 prohibited a member of the California bar from knowingly assisting, soliciting, or
inducing any violation of the rules or the State Bar Act. (Bus. & Prof. Code, § 6000 et.
seq.)
6
B. Defendants’ Demurrer and the Trial Court’s Ruling
Defendants filed a general demurrer to the complaint, that is, they claimed it failed
to state a cause of action. (Code Civ. Proc., § 430.10, subd. (e).) They argued that their
alleged conduct and statements in filing and pursuing the ADA lawsuits were “absolutely
protected by California’s litigation privilege.”5 The People opposed the demurrer.
Following a hearing, the trial court concluded that it was very clear that the
litigation privilege protected defendants’ communications made in, and in furtherance of,
the ADA lawsuits, and there was no reasonable possibility that the complaint could be
amended to state a cause of action. The court thus sustained the demurrer, without leave
to amend, and entered judgment dismissing the complaint. The People filed this timely
appeal.
III. DISCUSSION
A. Standard of Review
A general demurrer to a complaint is properly sustained when the complaint fails
to state facts sufficient to constitute a cause of action. (Code Civ. Proc., § 430.10,
5 Defendants alternatively claimed that their actions and communications in filing
and pursuing the ADA lawsuits constituted protected petitioning activity under the First
Amendment and the Noerr-Pennington doctrine, and that the second cause of action did
not state a claim because they did not engage in any “advertising,” as that term is used in
Business and Professions Code section 17500. The trial court did not rule on these
alternative grounds for the demurrer, given its conclusion that the litigation privilege
applied to the entire complaint. We also do not reach these issues, given our conclusion
that the litigation privilege applies to the People’s UCL claim, and given that the People
have abandoned their False Advertising Law (FAL) claim (Bus. & Prof. Code, § 17500).
See footnote 6, post.
7
subd. (e); see Wittenberg v. Bornstein (2020) 51 Cal.App.5th 556, 566.) Our review of
the resulting judgment of dismissal is de novo. (Roy Allan Slurry Seal, Inc. v. American
Asphalt South, Inc. (2017) 2 Cal.5th 505, 512.)
In determining whether the complaint states a cause of action, we assume the truth
of its well-pleaded factual allegations, but not contentions, deductions, or conclusions of
fact or law. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 967; Blank v. Kirwan,
supra, 39 Cal.3d at p. 318.) We affirm the judgment of dismissal “ ‘if any one of the
several grounds of demurrer is well taken.’ ” (Wiseman Park, LLC v. Southern Glazer’s
Wine & Spirits, LLC (2017) 16 Cal.App.5th 110, 116.)
On appeal, the plaintiff has the burden of showing that the facts pleaded in the
complaint are sufficient to establish every element of the cause of action, and to
overcome the legal grounds on which the trial court sustained the demurrer. (Martin v.
Bridgeport Community Assn., Inc. (2009) 173 Cal.App.4th 1024, 1031.) The People have
not met this burden. As we explain, the litigation privilege applies to the People’s
complaint, and the People have not shown that an exception to the privilege applies.
B. The Litigation Privilege, Overview
The litigation privilege, codified at Civil Code section 47, subdivision (b), “states
the long-established rule that publications made in the course of a judicial proceeding are
absolutely privileged.” (Albertson v. Raboff (1956) 46 Cal.2d 375, 379 [former Civ.
Code, § 47(2)].) The privilege has been given “broad application.” (Silberg v. Anderson
(1990) 50 Cal.3d 205, 211.) Although it was originally enacted to immunize defendants
from liability for the tort of defamation, the privilege currently applies to all
8
communications, whether or not they amount to publications, and to all torts except
malicious prosecution. (Id. at p. 212.)
The “usual formulation” is that the privilege applies “to any communication
(1) made in judicial or quasi-judicial proceedings; (2) by litigants or other participants
authorized by law; (3) to achieve the objects of the litigation; and (4) that [has] some
connection or logical relation to the action.” (Silberg v. Anderson, supra, 50 Cal.3d at
p. 212.) “The privilege ‘is not limited to statements made during a trial or other [judicial
or quasi-judicial] proceedings, but may extend to steps taken prior thereto, or
afterwards.’ ” (Action Apartment Assn., Inc. v. City of Santa Monica (2007)
41 Cal.4th 1232, 1241 (Action Apartment Assn.).)
The privilege serves important public policies. Its principal purpose is to afford
litigants and witnesses “the utmost freedom of access to the courts without fear of being
harassed subsequently by derivative tort actions.” (Silberg v. Anderson, supra, 50 Cal.3d
at p. 213.) The privilege also promotes the effectiveness of judicial proceedings and the
administration of justice by encouraging “ ‘open channels of communication and the
presentation of evidence,’ ” and by enabling attorneys to “zealously protect their clients’
interests” without the threat of subsequent derivative tort actions. (Id. at pp. 213-214.)
“ ‘[It] is desirable to create an absolute privilege . . . not because we desire to protect the
shady practitioner, but because we do not want the honest one to have to be concerned
with [subsequent derivative tort] actions . . . .’ ” (Id. at p. 214.)
The privilege also serves to promote the finality of judgments: “[I]n immunizing
participants from liability for torts arising from communications made during judicial
9
proceedings, the [privilege] places upon litigants the burden of exposing during trial the
bias of witnesses and the falsity of evidence, thereby enhancing the finality of judgments
and avoiding an unending roundelay of litigation, an evil far worse than an occasional
unfair result.” (Silberg v. Anderson, supra, 50 Cal.3d at p. 214.) “For our justice system
to function, it is necessary that litigants assume responsibility for the complete litigation
of their cause during the proceedings. To allow a litigant to attack the integrity of
evidence after the proceedings have concluded, except in the most narrowly
circumscribed situations, such as extrinsic fraud, would impermissibly burden, if not
inundate, our justice system.” (Ibid.)
Although the privilege is held to be “absolute in nature” to effect its purposes
(Silberg v. Anderson, supra, 50 Cal.3d at p. 215), it is “not without limit.” (Action
Apartment Assn., supra, 41 Cal.4th at p. 1242.) In Action Apartment Assn., our Supreme
Court noted that the privilege does not apply in criminal prosecutions for perjury (Pen.
Code, § 118, et seq.), subornation of perjury (Pen. Code, § 127), and filing a false crime
report (Pen. Code, § 148.5). (Action Apartment Assn., at p. 1246.) Likewise, the
privilege does not apply in criminal prosecutions or State Bar disciplinary proceedings
for soliciting attorney business through runners or cappers (Bus. & Prof. Code, §§ 6152-
6153), or for violating Business and Professions Code section 6128, which, as relevant
here, makes it a misdemeanor for an attorney to engage in deceit or collusion with the
intent to deceive the court or any party. (Action Apartment Assn., at p. 1246.)
10
The court in Action Apartment Assn. noted that these particular exceptions to the
privilege “ha[ve] been guided by the ‘rule of statutory construction that particular
provisions will prevail over general provisions.’ ” (Action Apartment Assn., supra,
41 Cal.4th at p. 1246; Civ. Code, § 1859.) “Each of the above mentioned statutes is more
specific than the litigation privilege and would be [rendered] significantly or wholly
inoperable if its enforcement were barred when in conflict with the privilege. The crimes
of perjury and subordination of perjury would be almost without meaning if statements
made during the course of litigation were protected from prosecution for perjury by the
litigation privilege. The misdemeanors established by Business and Professions Code
section 6128 evince a legislative intent that certain attorney conduct not be protected
from prosecution by the litigation privilege.” (Action Apartment Assn., at p. 1246.)
“In all of the above examples,” the court “found exceptions to the litigation
privilege based on irreconcilable conflicts between the privilege and other coequal state
laws.” (Action Apartment Assn., supra, 41 Cal.4th at p. 1247; see Hagberg v. California
Federal Bank (2004) 32 Cal.4th 350, 361 [“Section 47(b), of course, does not bar a
criminal prosecution that is based on a statement or communication, when the speaker’s
utterance encompasses the elements of a criminal offense. (See, e.g., Pen. Code, §§ 118
[perjury], 148.5 [false report of criminal offense].)”].) There is, however, no “exception
for criminal prosecutions . . . inherent in the litigation privilege itself.” (Action
Apartment Assn., p. 1246.)
Apart from whether the privilege applies in particular criminal prosecutions, the
privilege has been held applicable in derivative civil actions based on allegations that the
11
defendants violated a criminal statute, or committed perjury or fraud, in a prior action.
(See, e.g., Ribas v. Clark (1985) 38 Cal.3d 355, 358-359, 364-365 [privilege applied in
derivative civil action based on attorney’s alleged violations of Pen. Code §§ 631, 637, &
637.2 (invasion of privacy) in prior action]; Steiner v. Eikerling (1986) 181 Cal.App.3d
639, 642-643 [privilege applied in derivative civil action based on defendants’
submission of forged and falsified will in prior probate proceeding]; Herterich v. Peltner
(2018) 20 Cal.App.5th 1132, 1141-1142 [privilege protected the defendant’s malicious or
fraudulent communications in prior probate proceeding in derivative civil action for
damages]; and Doctors’ Co. Ins. Servs. v. Superior Court (1990) 225 Cal.App.3d 1284,
1300 [privilege applied in derivative civil action based on the defendant’s alleged
subordination of perjury in prior action].)
In other derivative civil actions, courts have held that the privilege does not apply
if the action is based on a statute that is more specific in its operation than the privilege,
on the ground that the more specific statute would be rendered wholly or substantially
inoperable if the privilege applied. (See, e.g., Komarova v. National Credit Acceptance,
Inc. (2009) 175 Cal.App.4th 324, 337-340 [privilege did not apply in civil action for
damages for violations of Rosenthal Fair Debt Collection Practices Act (the Rosenthal
Act) (Civ. Code, § 1788 et seq.)]; People v. Persolve, LLC (2013) 218 Cal.App.4th 1267,
1275-1276 [privilege did not apply in People’s UCL for violations of the Rosenthal Act
and federal Fair Debt Collection Practices Act (15 U.S.C. § 1692 et seq.) (Persolve)];
Banuelos v. LA Investment, LLC (2013) 219 Cal.App.4th 323, 328-335 [privilege did not
apply to claim for retaliatory eviction under Civ. Code, § 1942.5]; and People ex rel.
12
Alzayat v. Hebb (2017) 18 Cal.App.5th 801, 807-808, 827-828 [privilege did not apply in
People’s qui tam action against plaintiff’s employer for violating the Insurance Frauds
Prevention Act (Ins. Code, § 1871 et seq.)].)
In contrast, courts have found that the privilege does apply in UCL actions that do
not involve statutory violations more specific than the privilege. (See, e.g., Rubin v.
Green (1993) 4 Cal.4th 1187, 1193-1204 (Rubin) [privilege barred UCL action against
attorney and capper for wrongful solicitation of litigation against plaintiff in prior action];
People ex rel. Gallegos v. Pacific Lumber Co. (2008) 158 Cal.App.4th 950, 955-956,
958-959 (Gallegos) [privilege barred People’s UCL action for intentional
misrepresentations and concealment of material facts in administrative proceedings under
the California Environmental Quality Act (CEQA) (Pub. Resources Code, § 21000 et
seq.)].)
C. The Litigation Privilege Applies to the People’s UCL Claim
The People argue that their UCL claim—their first cause of action alleging that
defendants engaged in unfair competition (Bus. & Prof. Code, § 17200), by filing and
pursuing the false and fraudulent ADA actions—falls outside the scope of the litigation
privilege.6 They argue that their UCL claim is predicated on three criminal statutes, each
more specific than the privilege: Penal Code sections 484 (grand theft) and 523
6 The People do not claim that their second cause of action against defendants for
violating Business and Professions Code section 17500 (FAL claim) in connection with
the ADA lawsuits is exempt from the litigation privilege. Instead, the People confine
their discussion to their UCL claim. Accordingly, we consider the People’s FAL claim
forfeited or abandoned. (Sierra Palms Homeowners Assn. v. Metro Gold Line Foothill
Extension Construction Authority (2018) 19 Cal.App.5th 1127, 1136.)
13
(extortion through writing), and Business and Professions Code section 6128,
subdivision (a) (attorney deceit or collusion with intent to mislead court or any party is a
misdemeanor). They further argue that the applications of these three predicate statutes
would be “significantly undermined” if the privilege barred their UCL claim. We
conclude that the privilege bars the People’s UCL claim.
We begin by noting that “[t]he UCL sets out three different kinds of business acts
or practices that may constitute unfair competition: the unlawful, the unfair, and the
fraudulent. (Bus. & Prof. Code, § 17200.)” (Rose v. Bank of America, N.A. (2013)
57 Cal.4th 390, 394.) “By proscribing ‘any unlawful’ business practice, ‘[Business and
Professions Code] section 17200 “borrows” violations of other laws and treats them as
unlawful practices that the [UCL] makes independently actionable.’ ” (Cel-Tech
Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163,
180.) “[B]y borrowing requirements from other statutes, the UCL does not serve as a
mere enforcement mechanism [of the other statutes]. [Rather, the UCL] provides its own
distinct and limited equitable remedies for unlawful business practices, using other laws
only to define what is ‘unlawful.’ ” (Rose v. Bank of America, N.A., at p. 397.)
In their UCL claim, the People allege that defendants engaged in all three types of
unfair competition. They claim defendants committed an unfair, unlawful, and
fraudulent business practice—by violating Penal Code sections 484 and 523, and
section 6128 of Business and Professions Code—in filing and pursuing the ADA
lawsuits. That is, they claim that defendants committed the crimes of theft and extortion
14
by writing, and that the attorney defendants also committed or consented to commit fraud
or deceit, with the intent to mislead the court or the defendants in the ADA lawsuits.7
By their UCL claim, the People are not enforcing the three predicate criminal
statutes that provide the basis of their UCL claim. (Rose v. Bank of America, N.A., supra,
57 Cal.4th at p. 397.) Rather, they are pursuing a civil enforcement action for injunctive
relief, civil penalties, and restitution, based on defendants’ unfair, unlawful, and
fraudulent business practice of violating the three predicate criminal statutes in filing and
pursuing the ADA lawsuits. The People do not dispute, and it is clear, that all of the
factual allegations underlying their UCL claim fall within the “usual formulation” of the
litigation privilege. (Silberg v. Anderson, supra, 50 Cal.3d at p. 212.) Instead, they argue
their UCL claim is excepted from the privilege because the predicate statutes underlying
it are more specific than the privilege, and the operation of these statues would be
substantially undermined if the privilege applied to their UCL claim.
When the “borrowed” statute underlying a UCL claim is more specific than the
privilege, the conduct “specifically prohibited” by the borrowed statute is excepted from
the privilege. (Persolve, supra, 218 Cal.App.4th at p. 1276.) But here, the crimes of
theft (Pen. Code, § 484) and extortion by writing (Pen. Code, § 523) are not more specific
7 Penal Code section 484 defines the crime of theft as including the taking of
personal property of another “by any false or fraudulent representation or pretense.”
Penal Code section 523 criminalizes, as a form of extortion (Pen. Code, § 519), sending a
letter or a writing to a person threatening to expose or impute to the person a “deformity,
disgrace, or crime.” (Pen. Code, § 519.) Section 6128 of the Business and Professions
Code, subdivision (a), provides in relevant part that, “Every attorney is guilty of a
misdemeanor who . . . [i]s guilty of any deceit or collusion, or consents to any deceit or
collusion, with intent to deceive the court or any party.”
15
than the privilege because they can be committed in many contexts, not only in a judicial
proceeding or to achieve the objects of the litigation. (See Silberg v. Anderson, supra, 50
Cal.3d at p. 212.) Nor, as we later explain, would the operation of these statutes be
substantially undermined by the application of the privilege to the People’s UCL claim.
(Cf. Persolve, supra, at p. 1275 [The Rosenthal Act and the federal Fair Debt Collection
Practices Act would be rendered “significantly inoperable” and “negated” if they “did not
prevail over the privilege where the two conflict.”].)
Although our Supreme Court has noted that the litigation privilege does not apply
to a criminal prosecution for violation of Business and Professions Code section 6128
(Action Apartment Assn., supra, 41 Cal.4th at p. 1246), the People are not criminally
prosecuting defendants for violating this statute. Rather, the People’s UCL claim
amounts to a derivative civil action against defendants based on fraudulent
communications that defendants made in, or in furtherance of, the filing and pursuit of
their ADA lawsuits. (Silberg v. Anderson, supra, 50 Cal.3d at p. 212.) The People’s
UCL claim is precisely the type of derivative civil action that the privilege was intended
to preclude. (See id. at pp. 216-218; Rubin, supra, 4 Cal.4th at pp. 1193-1204.)
Rubin is instructive. There, a co-owner of a mobilehome park, Rubin, sued one of
the park’s residents, Green, and Green’s attorneys, for various torts including interfering
in the park owners’ contractual relations with park residents, and for committing an
unfair business practice (Bus. & Prof. Code, § 17200) by unlawfully soliciting the park’s
residents to sue the park’s owners in a prior lawsuit, in violation of Business and
Professions Code sections 6152 and 6153. (Rubin, supra, 4 Cal.4th at p. 1191-1192,
16
1196-1197, 1200.) The Rubin court held that the litigation privilege barred Rubin’s tort
and UCL claims. (Id. at pp. 1196-1197.) It reasoned that the privilege protected the
defendants’ factual misrepresentations to the park residents, together with their other
communications made during, and in furtherance of, their filing of the prior lawsuit, even
if their conduct amounted to unlawful attorney solicitation. (Id. at p. 1196.)
In rejecting Rubin’s argument that the privilege did not bar his UCL claim, the
Rubin court noted that our Courts of Appeal had, in various cases, “rejected the claim that
a plaintiff may, in effect, ‘plead around’ absolute barriers to relief by relabeling the
nature of the action as one brought under the unfair competition statute.” (Rubin, supra,
4 Cal.4th at p. 1201.) The court further reasoned that, because the defendants’ conduct
was “clearly communicative and otherwise within the scope” of the privilege, permitting
“the same communicative acts to be the subject of an injunctive relief proceeding” under
the UCL would “upset the carefully constructed balance between ‘the freedom of an
individual to seek redress in the courts and the interest of a potential defendant in being
free from unjustified litigation . . . .’ ” (Id. at pp. 1202-1203.)
The Rubin court’s reasoning applies to the People’s UCL claim. Even if
defendants committed theft, extortion, and deceit or fraud (Pen. Code, §§ 484, 523;
Bus. & Prof. Code, § 6128) in filing and pursuing the ADA lawsuits, permitting the
People’s UCL claim would undermine the purposes of the privilege. (Rubin, supra,4 Cal.4th at pp. 1193-1204; Silberg v. Anderson, supra, 50 Cal.3d at p. 212.)
Additionally, the availability of criminal, civil, and State Bar sanctions for fraudulent
conduct in judicial proceedings supports taking an “expansive view of the privilege in
17
civil actions,” including in this action. (Hagberg v. California Federal Bank, supra, 32
Cal.4th at pp. 371-372; Rubin, at pp. 1198-1199, 1203-1204; Silberg v. Anderson, at pp.
218-219 [“[I]n a good many cases of injurious communications, other remedies aside
from a derivative suit . . . will exist and may help deter injurious [communications]
during litigation. Examples of these remedies include criminal prosecution for perjury
. . . or subordination of perjury . . . .”].)8
8 At oral argument, the People asked this court to, at minimum, allow their UCL
claim to proceed against the attorney defendants based on the attorney’s alleged
misdemeanor violations of section 6128, subdivision (a), of the Business and Professions
Code in filing and pursuing the ADA lawsuits. As they did in their briefing, the People
maintain that Business and Professions Code section 6128 is more specific than the
litigation privilege. We agree. As our Supreme Court has observed, “The misdemeanors
established by Business and Professions Code section 6128 evince a legislative intent that
certain attorney conduct not be protected from prosecution by the litigation privilege.”
(Action Apartment Assn., supra, 41 Cal.4th at p. 1246, added italics.) But as we have
noted, the People, by their UCL claim, are not prosecuting the attorney defendants for
any misdemeanor violations of Business and Professions Code section 6128. Rather, the
People are seeking to hold all of the defendants civilly liable under the UCL based on
their alleged fraud and deceit in filing and pursuing the ADA lawsuits.
This is a critical distinction. As we have noted, courts have held that the litigation
privilege does not apply to a UCL claim that is based on a “borrowed” statute that is
more specific than the privilege, but only if the more specific statute would be rendered
wholly or substantially inoperable if the privilege applied. (See, e.g., Persolve, supra,
218 Cal.App.4th at p. 1276 [“Where, as here, the ‘borrowed’ statute is more specific than
the litigation privilege and the two are irreconcilable, unfair competition law claims
based on conduct specifically prohibited by the borrowed statute are excepted from the
litigation privilege.” (Italics added.)].) The privilege and Business and Professions Code
section 6128 are not irreconcilable. That is, the latter statute will not be rendered wholly
or substantially inoperable by applying the privilege to the People’s UCL claim, to the
extent the UCL claim is based on the attorney defendants’ alleged violations of the
statute. Indeed, People may criminally prosecute the attorney defendants for their alleged
misdemeanor violations of Business and Professions Code section 6128 in filing and
pursuing the ADA lawsuits. The attorney defendants are also subject to State Bar
disciplinary proceedings for the same alleged misdemeanor violations. Further, allowing
the People’s derivative UCL action to proceed against the attorney defendants based on
[footnote continued on next page]
18
The People argue that, “if affirmed, the trial court’s order will immunize
respondents’ criminal fraud scheme and frustrate the People’s enforcement of criminal
laws designed to protect against attorney deceit, extortion, and theft.” We respectfully
disagree. As noted, defendants’ alleged misconduct is not immunized by application of
the litigation privilege to this lawsuit. There remains the availability of criminal charges9
and other remedies for defendants’ alleged fraudulent conduct that would not conflict
with the privilege, including State Bar sanctions and civil sanctions in the ADA lawsuits
themselves. As courts have also recognized, the unavailability of derivative civil
liability, in a subsequent civil suit, for fraudulent conduct in litigation is “ ‘ “the
necessarily harsh result in extending a privilege to false and fraudulent statements made
in the course of a judicial proceeding. We accept that result, however, on account of the
overriding importance of the competing public policy in favor of enhancing the finality of
judgments and avoiding unending postjudgment derivative litigation—a policy which
places the obligation on parties to ferret out the truth while they have the opportunity to
do so during litigation.” ’ ” (Herterich v. Peltner, supra, 20 Cal.App.5th at p. 1142.)
The “privilege extends to fraudulent statements, even when made to a court, if they were
made in furtherance of litigation.” (Id. at p. 1141; Flatley v Mauro (2006)
their alleged violations of the statute in the ADA lawsuits would undermine one of the
principal purposes of the privilege: promoting the effectiveness of judicial proceedings
by encouraging attorneys to “zealously protect their clients’ interests” without fear of
subsequent derivative actions. (Silberg v. Anderson, supra, 50 Cal.3d at p. 214.)
9 We note the People are not pursuing criminal charges against defendants by this
action.
19
39 Cal.4th 299, 322 [“The litigation privilege has been applied in ‘numerous cases’
involving ‘fraudulent communication or perjured testimony.’ ”].)
We also reject the People’s claim that privilege should not apply here because
their UCL claim is based on statutory predicate offenses. The People maintain that UCL
claims based on statutory predicate offenses, like theirs, “do not offend the primary
purpose of the litigation privilege” because they are “ ‘equitable in nature; damages
cannot be recovered.’ ” But all UCL actions are equitable in nature; the remedies are
limited to injunctive relief and restitution. (Prakashpalan v. Engstrom, Lipscomb & Lack
(2014) 223 Cal.App.4th 1105, 1133.) Additionally, all derivative UCL actions—those
based on communications made in, or in furtherance of, a prior judicial proceeding—
undermine free and open access to the courts and the finality of judgments, unless the
action is based on a statute that is more specific than the privilege, and the statute would
be vitiated or significantly undermined if the privilege applied. (See, e.g., Persolve,
supra, 218 Cal.App.4th at p. 1275.)
D. The Privilege Applies to the People’s UCL Claim, Even Though the People Were Not
a Party to the ADA Lawsuits and Are Suing Defendants on Behalf of the Public
Lastly, the People claim the litigation privilege “must yield” to their UCL claim
because they were not a party to the ADA lawsuits, and they are not a private litigant but
are representing the public in their UCL claim. They argue, “if criminal conduct is
tailored to coincide with a judicial proceeding,” and if prosecutors are barred from
pursuing UCL actions to enjoin such conduct, then “not only have [the underlying
criminal] statutes been rendered significantly inoperable, but the purpose of the [UCL]
20
will also have been thwarted.” They stress that the UCL is broad and was intended “ ‘to
permit tribunals to enjoin on-going wrongful business conduct in whatever context such
activity might occur.’ ” (People v. McKale (1979) 25 Cal.3d 626, 632.) In effect, the
People ask this court to create an exception to the privilege where a UCL action, based on
criminal predicate statutes, is brought by a law enforcement agency that was not a party
to the prior action in which the underlying privileged communications were made.
Following our Supreme Court in Action Apartment Assn., and the Court of Appeal in
Gallegos, we decline to do so.
In Action Apartment Assn., the plaintiffs, a group of landlords, sued the City of
Santa Monica, claiming that the litigation privilege preempted the City’s “Tenant
Harassment” ordinance. (Action Apartment Assn., supra, 41 Cal.4th at pp. 1237, 1239.)
Among other things, the ordinance authorized the City to seek civil and criminal penalties
against a landlord for suing a tenant to recover possession of a rental unit when the
landlord lacked a reasonable factual or legal basis for the suit. (Id. at p. 1237.) The court
in Action Apartment Assn. agreed with the plaintiffs that the privilege preempted this part
of the ordinance: “Whether actions pursuant to this provision of [the ordinance] are
brought by the City, a third party, or a tenant, such actions alleging that a landlord had
improperly filed an action to recover possession of rental housing would severely restrict
landlords’ freedom of access to the courts.” (Id. at p. 1243.)
The Action Apartment Assn. court squarely rejected the City’s suggestion that any
claims brought by parties not involved in the underlying litigation, including claims
brought by government entities, are not barred by the privilege. (Action Apartment Assn.,
21
supra, 41 Cal.4th at p. 1247.) The court acknowledged that, in Rubin, it “stated in dictum
‘that the policy underlying the unfair competition statute can be vindicated by multiple
parties other than plaintiff,’ including the Attorney General, district attorneys, certain city
attorneys, and ‘members of the public who, unlike plaintiff, are not adversaries in
collateral litigation involving the same attorneys.’ ” (Ibid., citing Rubin, supra, 4 Cal.4th
at p. 1204, italics added.) But the court expressly “decline[d] to recognize a broad
exception to the litigation privilege for any party who did not participate in the
underlying litigation,” because “[a]n exception to the litigation privilege for all suits
brought by parties who were not involved in the underlying litigation would be
antithetical to the privilege’s purposes. . . . Derivative litigation brought by parties who
did not participate in the underlying litigation, like litigation brought by parties who did
participate, would pose an external threat of liability that would deter potential litigants,
witnesses, and others from participating in judicial proceedings.” (Id. at pp. 1247-1248.)
The Court of Appeal reached the same conclusion in Gallegos. There, the People
brought a UCL action against Pacific Lumber Co. for its alleged fraudulent
representations and concealments of facts in prior administrative proceedings under
CEQA. (Gallegos, supra, 158 Cal.App.4th at pp. 954-956.) The company’s fraud
allegedly resulted in it obtaining administrative approval for an increased rate of timber
harvesting, as well as decreased environmental mitigation requirements on the company’s
timberlands. (Id. at pp. 954-955.) The People sought civil penalties and other relief
under the UCL to prevent the company “from realizing profits on timber harvested
pursuant to [the company’s] allegedly fraudulently obtained” plans and approvals. (Id. at
22
p. 956.) The Gallegos court affirmed the order sustaining the company’s general
demurrer to the UCL complaint on the ground that the litigation privilege applied. (Id. at
pp. 954, 959.)
Following Action Apartment Assn., the Gallegos court rejected the People’s claim
that the privilege did not apply to their UCL complaint because they (1) were not a party
to the underlying CEQA proceedings, and (2) are a government entity, suing on behalf of
the public rather than a private litigant. (Gallegos, supra, 158 Cal.App.4th at pp. 960-
961.) For the same reasons, we reject the People’s argument that the privilege does not
apply to their UCL claim, and that their UCL claim is not truly a derivative suit because
they were not a party to the ADA lawsuits and are suing defendants on behalf of the
public. As we have explained, the People’s UCL claim is precisely the type of derivative
civil action that the privilege was intended to preclude. (Action Apartment Assn., supra,
41 Cal.4th at pp. 1247-1248.)
Lastly, in Action Apartment Assn., our Supreme Court acknowledged that the
Legislature could create exceptions to the litigation privilege for parties and nonparties to
prior judicial proceedings. (Action Apartment Assn., supra, 41 Cal.4th at p. 1247.) The
People’s supporting amicus curiae claims that the voters created an exception to the
litigation privilege for public prosecutors in UCL actions when, in 2004, the voters
approved Proposition 64 (Gen. Elec. (Nov. 2, 2004)). We disagree.
Proposition 64 revised the UCL’s standing requirements to provide that private
plaintiffs can no longer bring UCL claims on behalf of themselves or the public, unless
they “suffered injury in fact and . . . lost money or property as a result of . . . unfair
23
competition.” (Bus. & Prof. Code, § 17204, as amended by voters, Prop. 64, § 3, eff.
Nov. 3, 2004.) But we discern no intent and purpose in the voters’ enactment of
Proposition 64 to exempt UCL actions, brought by public prosecutors, from the litigation
privilege.
As our Supreme Court has explained, “ ‘[i]n 2004, the electorate substantially
revised the UCL’s standing requirement; where once private suits could be brought by
“any person acting for the interests of itself, its members or the general public” (former
§ 17204, as amended by Stats. 1993, ch. 926, § 2, p. 5198), now private standing is
limited to any “person who has suffered injury in fact and has lost money or property” as
a result of unfair competition (§ 17204, as amended by Prop. 64, as approved by voters,
Gen. Elec. (Nov. 2, 2004) § 3; see Californians for Disability Rights v. Mervyn’s, LLC
[(2006)] 39 Cal.4th [223,] 227-228 . . . ). The intent of this change was to confine
standing to those actually injured by a defendant’s business practices and to curtail the
prior practice of filing suits on behalf of “ ‘clients who have not used the defendant’s
product or service, viewed the defendant’s advertising, or had any other business dealing
with the defendant . . . .’ ” (Californians for Disability Rights, at p. 228, quoting
Prop. 64, § 1, subd. (b)(3).)’ ” (Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310,
320-321.)
Amicus curiae argues that the “intent and purpose” of Proposition 64 was actually
to “clarify and strengthen the unique role of public prosecutors in enforcing the UCL to
protect the public from ‘shakedown’ lawsuits” like defendants’ ADA lawsuits. But
Proposition 64 did not change the standing requirements for public prosecutors to bring
24
UCL claims. Nor did it in any way concern the litigation privilege or amend Civil Code
section 47, subdivision (b).
Amicus curiae points to nothing in the provisions of Proposition 64, or in its ballot
summary or arguments, to support its claim. (See B.M. v. Superior Court (2019)
40 Cal.App.5th 742, 753 [in determining intent of voter initiative, a court looks to the
provisions of the initiative and may also look to the ballot materials in support of its
passage].) We discern no voter intent and purpose, either in the language of
Proposition 64 or in its ballot summary and arguments, to repeal or limit the litigation
privilege of Civil Code section 47, subdivision (b), when a public prosecutor brings a
derivative UCL claim against a defendant based on communications that the defendant
made in or in furtherance of a prior judicial proceeding.10 For the reasons explained, the
litigation privilege applies to the People’s UCL claim.
10 We note the Legislature is quite capable of expressing its intent to exempt
public prosecutors from the application of a law where it desires to do so. For example,
Code of Civil Procedure section 425.16, subdivision (d), exempts public prosecutors from
anti-SLAPP lawsuits. It provides as follows: “This section shall not apply to any
enforcement action brought in the name of the people of the State of California by the
Attorney General, district attorney, or city attorney, acting as a public prosecutor.”
25
IV. DISPOSITION
The judgment of dismissal is affirmed. Defendants shall recover their costs on
appeal. (Cal. Rules of Court, rule 8.278.)
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
FIELDS
J.
I concur:
McKINSTER
Acting P. J.
26
[People v. Rutherford, E073700]
RAPHAEL, J., Concurring.
I respectfully concur separately because I think we cannot reject this lawsuit
because it is based on communications protected by the litigation privilege, as we do,
without holding more broadly that an unfair competition law (UCL) lawsuit cannot be
maintained in the face of a litigation privilege bar. It does not work to try to distinguish
People v. Persolve, LLC (2013) 218 Cal.App.4th 1267 (Persolve), which allowed a UCL
lawsuit founded on privileged communications. We must either follow Persolve or
disagree with it.
The reason for the exception to the Civil Code, section 47, subdivision (b) (section
47(b)) litigation privilege for statutes more specific than the privilege is that we presume
that the legislature would not have enacted a statute where the privilege would preclude
nearly all its uses. But the UCL is wide ranging, creating a civil cause of action for
conduct that is unfair, unlawful, or fraudulent. “The UCL . . . is not necessarily ‘more
specific than the litigation privilege and would [not] be significantly or wholly inoperable
if its enforcement were barred when in conflict with the privilege.’” (People ex rel.
Gallegos v. Pacific Lumber Co. (2008) 158 Cal.App.4th 950, 962.) Consequently, we
cannot infer that the legislature meant for the UCL itself to trump the privilege, so it does
not fall into the exception.
Persolve, however, held that we are to examine whether the statute “borrowed” by
the UCL in a case is more specific than the litigation privilege, and, if so, the UCL
lawsuit can go forward just as a case based directly on that borrowed statute could.
1
(Persolve, supra, 218 Cal.App.4th at p. 1276.) One of the borrowed statutes in this case
is Business and Professions Code section 6128 (section 6128), which criminalizes certain
types of attorney deceit. As section 6128 is more specific than the privilege, it “evince[s]
a legislative intent” that prosecution of the conduct is not barred by the privilege.
(Action Apartment Assn, Inc. v. City of Santa Monica (2007) 41 Cal.4th 1232, 1246.)
Under a straightforward application of Persolve, this UCL lawsuit would not be barred to
the extent it relies on (“borrows”) section 6128.
By holding this lawsuit is barred without rejecting Persolve, today’s opinion
suggests that, among statutes that are more specific than the privilege, some can serve as
a predicate for a UCL lawsuit but some cannot. I do not see basis for distinguishing in
this way among the statutes that are more specific than the privilege.
The principal reason today’s opinion offers for distinguishing Persolve is that
section 6128 can be enforced in ways other than through the UCL, including criminal
prosecutions and state bar proceedings. (Maj. opn., ante, at p. 18, fn. 8.) This reason
cannot distinguish Persolve because it would mean that Persolve itself was wrongly
decided: the state and federal debt collection statutes “borrowed” in Persolve also can be
enforced without the UCL. Those statutes can be enforced through an individual debtor’s
private right of action (Civ. Code § 1788.30), through a class action (see Timlick v.
National Enterprise Systems, Inc. (2019) 35 Cal.App.5th 674, 689), or by Federal Trade
Commission enforcement actions (15 U.S.C. § 1692l). A few debt collection violations
can even be enforced through misdemeanor prosecutions (see Civ. Code § 1788.16).
2
If Persolve is correct to require us to focus on whether the borrowed statute is
more specific than the privilege, I think we would be compelled to let this lawsuit
proceed to the extent it borrows section 6128, which is more specific than the privilege.
But I am not persuaded that Persolve correctly treats the UCL as an empty vessel
for the “borrowed” statute. Rather, it seems that we should focus on the UCL itself,
which is not narrower than the privilege and thus not an exception to it.
First, in other contexts, our Supreme Court has emphasized that the UCL is not “a
mere enforcement mechanism” but a substantive statute that “provides its own distinct
and limited equitable remedies for unlawful business practices, using other laws only to
define what is ‘unlawful.’” (Rose v. Bank of America, N.A. (2013) 57 Cal.4th 397; see
also Stop Youth Addiction, Inc. v. Lucky Stores, Inc. (1998) 17 Cal.4th 553, 566
[superseded by statute on other grounds] [“SYA seeks relief from alleged unfair
competition, not to enforce the Penal Code.”]) This counsels for a focus on whether the
UCL itself is broader than the privilege, not on whether the borrowed statute is. In
practical terms as well, the UCL is not merely a redundant way to enforce a borrowed
statute, because it allows civil plaintiffs (including class action plaintiffs) to bring
lawsuits to enforce criminal statutes.
Secondly, the UCL is not necessary to give meaning to the statutes it borrows, at
least when they can be enforced directly. To harmonize section 6128 with the section
47(b) privilege, the former has been construed to be an exception to the latter when a
district attorney brings a section 6128 prosecution. The Legislature, we infer, would not
have intended to enact a crime that could never be enforced due to the privilege. It is not,
3
however, necessary that a UCL action founded on section 6128 be an exception to the
statutory privilege, because both section 6128 and the UCL have effect in other ways.
In sum, if we agree with Persolve that we are to focus on the borrowed statute in a
UCL action, I think we would have to approve of this lawsuit to the extent that it borrows
section 6128. It is because I think we instead must focus on the UCL itself that I concur
in the disposition, and I agree with the otherwise well reasoned opinion.
RAPHAEL
J.
4