Opinion
1:22-cv-00785-JLT-HBK
09-14-2023
ANDREW MOSANA, Plaintiff, v. PROPERTY AND CASUALTY INSURANCE COMPANY OF HARTFORD, et al., Defendants.
ORDER GRANTING DEFENDANT'S AMENDED MOTION TO DISMISS WITH LEAVE TO AMEND AND DEFERRING RULING ON DEFENDANT'S SPECIAL MOTION TO STRIKE (DOC. NO. 12)
On November 21, 2022 the district court reassigned the instant Motion to the undersigned for direct disposition based on the Parties Stipulation to consent to magistrate judge jurisdiction for the instant Motion only. (See Doc. Nos. 30, 34). On December 9, 2022 the case was referred to the Court's Voluntary Dispute Resolution Program (“VDRP”). (Doc. No. 38). A Notice of Completion of VDRP filed on July 5, 2023 indicates the case did not settle.
HELENA M. BARCH-KUCHTA UNITED STATES MAGISTRATE JUDGE.
Pending before the Court is Defendant Todd Haines' amended motion to dismiss and special motion to strike filed on August 18, 2022. (Doc. No. 12, “Motion”). Pursuant to Federal Rule of Civil Procedure 12(b)(6), Haines seeks dismissal of Plaintiff's Complaint, and also brings a special motion to strike under Cal. Civil Code § 425.16. (Id.). Plaintiff filed an Opposition (Doc. No. 17), and Haines filed a Reply (Doc. No. 23). For the reasons set forth below, the Court grants Defendant's Motion to Dismiss without prejudice to Plaintiff being granted leave to file an amended complaint. The Court thus defers ruling on the special motion to strike.
BACKGROUND
A. Procedural History and Summary of Complaint
Plaintiff initiated this action by filing a civil complaint against Defendants Haines and Property and Casualty Insurance Company of Hartford (“Hartford”) (collectively “Defendants”), alleging violations of the Servicemembers Civil Relief Act (“SCRA”), 50 U.S.C. § 3901, and the California Military and Veterans Code, §§ 400 et seq. (Doc. No. 1 at 1).
In early 2018, Plaintiff was involved in a serious automobile accident, and on July 29, 2020 he entered into a contract with Hartford to make payments for the resulting damages. (Doc. No. 1 at 5 ¶ 22; Doc. No. 12 at 3; Doc. No. 17 at 3). Hartford later retained Defendant Haines to file a collections lawsuit in Tulare County after Plaintiff allegedly failed to make payments. (Doc. No. 12 at 3). In December 2018, Plaintiff enlisted in the United States Air Force, and has been on active military duty since that time. (Doc. No. 1 at 5 ¶ 21; Doc. No. 17 at 3).
On March 4, 2022, after Plaintiff failed to respond to the collections suit, Haines filed a request for default using a standard CIV-100 Form and signed the included “Declaration of nonmilitary status” indicating his belief that “No Defendant named in item 1(c) of the application is in the military service as that term is defined by either the Servicemembers Civil Relief Act . . . or California Military and Veterans Code . . .” (Doc. No. 12-2 at 19). The Superior Court entered a default on March 17, 2022. (Id. at 18). Plaintiff was deployed at the time of Defendants' petition to the Superior Court and asserts he received no actual notice of the court's action. (Doc. No. 1 at 5 ¶ 23, 6 ¶ 30).
After learning of the entry of default, Plaintiff filed the instant lawsuit on June 24, 2022, alleging violations of the SCRA and MVC. (See Doc. No. 1). In particular, Plaintiffs complaint alleges that Defendants violated 50 U.S.C § 3931 by filing a false affidavit in order to obtain a default judgment against Plaintiff, and violated a parallel state law provision, California Military and Veterans Code § 402. On June 30, 2022, Defendants filed a motion in to vacate the entry of default, which Superior Court granted on July 1, 2022. (Doc. No. 12-2 at 21-29).
B. Defendant's Motion to Dismiss
The instant Motion seeks dismissal of Plaintiff's Complaint against Defendant Haines on several grounds. (See generally Doc. No. 12). First, Haines argues that the plain language of 50 U.S.C § 3931 reflects an intent to protect military personnel not from defaults, but only from default judgments. (Doc. No. 12 at 6) (citing Interinsurance Exchange v. Collins, 30 Cal.App.4th 1445, 1448 (1994)). Because Defendants never sought a default judgment, and indeed specifically requested only entry of default, the penalty provisions of 50 U.S.C. § 3931 do not apply and Plaintiff's Complaint fails to state a claim. (Doc. No. 12 at 6-7.). Moreover, when apprised of their error regarding Plaintiff's military status, Defendants successfully moved to vacate the entry of default. (Id.). Haines contends that Plaintiffs claim under California Military and Veterans Code § 402 fails for the same reason as his SCRA claim. (Doc. No. 12 at 7-8); see Cal. Mil. & Vet. § 402(a).
Alternatively, Defendant Haines argues that Plaintiff's suit against him is barred by the Noerr-Pennington Doctrine, and should be stricken under California's anti-SLAPP law, Cal. Civ. Code § 425.16. (Id. at 8-11). Defendant seeks approximately $3,900.00 in attorney's fees and costs. (Id. at 11).
C. Plaintiff's Opposition
In opposition, Plaintiff argues that regardless of whether a judgment was ultimately entered against him, “the filing of [a] false declaration in and of itself is a violation of the SCRA and MVC.” (Doc. No. 17 at 8). Plaintiff points out that obtaining a default is a necessary step towards securing a default judgment, and that the CIV-100 “Declaration of nonmilitary status” signed by Defendant Haines states that the declaration must be signed “for a judgment.” (Id.). Thus, Defendants cannot credibly argue they were not seeking a default judgment; they had signed, under penalty of perjury, a declaration intended for the specific purpose of obtaining a default judgment. (Id. at 7). Plaintiff argues that he has stated a viable claim under both the SCRA and MVC because the record reflects Defendants sought to use a false affidavit or declaration to obtain a default judgment, a violation of both statutes. (Id. at 5-9).
Plaintiff asserts that the Noerr-Pennington doctrine does not apply to this case, because filing a false affidavit is not protected activity under the doctrine. (Id. at 9-10). As to Haines' special motion to strike under § 425.16, Plaintiff argues his lawsuit is not meritless or harassing, and indeed he has demonstrated a likelihood of success on the merits, thereby defeating Defendant's motion to strike. (Id. at 10-12). In the alternative, Plaintiff argues that if the Court finds that dismissal is warranted, he should be granted leave to amend his Complaint. (Id. at 12).
APPLICABLE LAW AND ANALYSIS
A. Applicable Law
A motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure “tests the legal sufficiency of a claim.” Conservation Force v. Salazar, 646 F.3d 1240, 1242 (9th Cir. 2011). Dismissal for failure to state a claim is proper if there is a “lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory.” Id.; see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007) (to survive a motion to dismiss, the complaint must have sufficient facts to state a facially plausible claim to relief). In deciding a motion under Rule 12(b)(6), the court accepts as true all well-pled factual allegations in the complaint and determines whether the factual allegations are sufficient to state a right to relief above the speculative level. Ashcroft v. Iqbal, 556 U.S. 662 (2009); see also Nw. Envtl. Def. Ctr. v. Brown, 640 F.3d 1063, 1070 (9th Cir. 2011) (court accepts as true all material allegations in the complaint, as well as any reasonable inferences to be drawn from them).
“Where a motion to dismiss is granted, a district court must decide whether to grant leave to amend. Generally, the Ninth Circuit has a liberal policy favoring amendments and, thus, leave to amend should be freely granted.” Winebarger v. Pennsylvania Higher Educ. Assistance Agency, 411 F.Supp.3d 1070, 1082 (C.D. Cal. 2019) (citation omitted). However, where leave to amend would be futile, because “the allegation of other facts consistent with the challenged pleading could not possibly cure the deficiency,” leave to amend may be denied. DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992).
B. Plaintiff Fails to State a Claim Under the SCRA or MVC
It is well established that the intent of 50 U.S.C. § 3931 is to protect servicemembers from default judgments being entered without their knowledge. See, e.g., U.S. v. Kaufman, 453 F.2d 306, 308-09 (2d Cir. 1971); Fifth Third Bank v. Fla. Caring Hands Corp., 2014 WL 12609868, at *2 (M.D. Fla. July 21, 2014); Kee v. Hasty, 2004 WL 807071, at *6 (S.D.N.Y. Apr. 14, 2004).
Indeed, the statute's title, “Protection of servicemembers against default judgments” reflects this clear purpose. See 50 U.S.C. § 3931. The statute establishes a process designed to avoid such an occurrence, including requiring that prior to judgment being entered the plaintiff file an affidavit:
stating whether or not the defendant is in military service and showing necessary facts to support the affidavit; or if the plaintiff is unable to determine whether or not the defendant is in military service, stating that the plaintiff is unable to determine whether or not the defendant is in military service.50 U.S.C § 3931(b)(1)(A)-(B). If it appears that the defendant is in military service, the court may not enter judgment until it appoints an attorney to represent the defendant. 50 U.S.C. § 3931(b)(2). And if the court cannot determine whether defendant is in military service, the court may require plaintiff to file a bond sufficient to indemnify defendant in the event of a judgment being entered erroneously. 50 U.S.C. § 3931(b)(3).
The penalty provision of 50 U.S.C. § 3931 states that:
A person who makes or uses an affidavit permitted under subsection (b) (or a statement, declaration, verification, or certificate as authorized under subsection (b)(4)) knowing it to be false, shall be fined as provided in title 18, or imprisoned for not more than one year, or both.50 U.S.C. § 3931(c). Notably, to find a violation of § 3931(c), a person must make or use an affidavit “knowing it to be false . . .” Here, Plaintiff points to Haines' professed experience and expertise in debt collection to imply that he should have exercised more diligence before signing a declaration that Plaintiff was not in active military service. (Doc. No. 17 at 3). Plaintiff points out that a search of the Department of Defense's Manpower Data Center, freely available online, would have revealed that Plaintiff was in fact in active military service. (Id.). While the Court agrees that Haines lacked diligence, the Complaint fails to allege facts showing that he knew the declaration he signed to be false.
Further, the Court is persuaded by the weight of authority holding that the penalty provisions of § 3931(c) do not apply to a mere entry of default. In Palaciosreal v. Indem. Co. of California, Inc., 2013 WL 12139138, at *1 (C.D. Cal. Oct. 21, 2013), the plaintiff brought suit against defendants for seeking entry of default in a superior court action and included an affidavit falsely asserting that plaintiff was not in the military. Id. at *3-*4. The court looked to the title and the well-established purpose of § 3931, and held that “[b]ecause Defendants never sought a default judgment against Plaintiff, the SCRA affidavit requirement does not apply. Moreover, because Defendants were not required to submit an affidavit, no independent claim based on the allegedly false affidavits exists.” Id. at *4. Similarly, in Davis v. Voorhees, 2023 WL 3884996 (D. Ariz. June 8, 2023), the court found that a university administrator's declaration of nonmilitary status in seeking entry of default in a defamation lawsuit, even if false, did not state a claim under the SCRA. As the court noted:
even if the Court assumes Ms. Davis' ROTC membership constituted active military service and that Dr. Voorhees knew Ms. Davis was an active servicemember at the time she submitted the affidavit, Ms. Davis can state no plausible SCRA claim because Dr. Voorhees did not seek nor did the state court enter a judgment of any kind.Id. at *2; see also Prudential Ins. Co. of Am. v. Forrest, 2021 WL 10256467, at *2 (M.D. Tenn. Mar. 24, 2021) (“[T]he SCRA's affidavit requirement and subsequent protections only apply when a plaintiff seeks default judgment pursuant to Federal Rule of Civil Procedure 55(b), not entry of default by the Clerk pursuant to Rule 55(a).”); but see Simmons v. Villages Cmty. Ass n, 2020 WL 8365262, at *2 (C.D. Cal. Dec. 17, 2020) (finding plaintiff adequately pled a claim under SCRA § 3931 where defendant filed a false affidavit of nonmilitary status in connection with small claims action).
Similarly, here, Defendants could have requested a default judgment. This would have brought the attached Declaration of nonmilitary status within the ambit of § 3931. Instead, Defendants sought only an entry of default. This distinction is evident in the form used by Defendants in the Superior Court action, Judicial Council of California's form CIV-100, where an applicant must designate whether he or she is seeking an entry of default, court judgment, or clerk judgment by selecting the appropriate box. It is uncontested that at no time did Defendants request a default judgment. (See Doc. No. 1); see Palaciosreal, 2013 WL 12139138 at *4. The mere fact that an entry of default is a prerequisite to a default judgment does not establish § 3931(c) applies to Defendant's action. Accordingly, the Court finds the Complaint fails to state a claim under the SCRA.
The same reasoning set forth above applies to Plaintiff's claim under MVC § 402, whose text and purpose are virtually identical to those of § 3931. Given that the Superior Court in the collection action did not enter a default judgment, Defendants were not required to file a “declaration under penalty of perjury setting forth facts showing that the defendant is not in the military service” under MVC § 402(a), nor do the penalty provisions of MVC § 402(b) apply. Accordingly, the Complaint fails to state a claim under MVC § 402 based on Defendant Haines submitting a superfluous Declaration of nonmilitary status in the CIV-100.
C. Noerr-Pennington Doctrine
Because the undersigned finds, as set forth above, that Plaintiff's Complaint fails to state a claim, it need not address Defendant's argument that the claim is barred by the Noerr-Pennington doctrine.
D. Special Motion to Strike
Section 425.16 of the California Code of Civil Procedure was enacted to provide for the early dismissal of meritless suits aimed at chilling the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances. See Cal. Code Civ. P. § 425.16(a); Braun v. Chronicle Publishing Co., 52 Cal.App.4th 1036, 1042 (1997). These meritless suits often are referred to as “Strategic Lawsuits Against Public Participation” or “SLAPP” suits, with the result that § 425.16 has come to be called the “anti-SLAPP statute.” See id. at 1040 & n. 1. The statute provides that:
A cause of action against a person arising from any act of that person in furtherance of the person's right of petition or free speech under the United States or California Constitution in connection with a public issue shall be subject to a special motion to strike, unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim.Cal. Code Civ. P. § 425.16(b)(1). Acts “in furtherance of a person's right of petition or free speech . . . in connection with a public issue” are defined as including: (1) any written or oral statement or writing made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law; (2) any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law; or (3) any written or oral statement or writing made in a place open to the public or a public forum in connection with an issue of public interest. See id. § 425.16(b)(e); Briggs v. Eden Council For Hope And Opportunity, 19 Cal.4th 1106, 1112 (1999).
A defendant filing an anti-SLAPP motion must make an initial prima facie showing that the plaintiffs suit arises from an act in furtherance of the defendant's rights of petition or free speech. See Braun, 52 Cal.App.4th at 1042-43. If the defendant makes this showing, the burden shifts to the plaintiff to demonstrate a probability of prevailing on the challenged claims. See Conroy v. Spitzer, 70 Cal.App.4th 1446, 1450 (1999).
Defendants sued in federal courts may bring anti-SLAPP motions to strike state law claims and are entitled to attorneys' fees and costs when they prevail. See Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1109-10 (9th Cir. 2003); United States ex rel. Newsham v. Lockheed Missiles & Space Co., 190 F.3d 963, 971 (9th Cir. 1999). However, “[procedural state laws are not used in federal court if to do so would result in a direct collision with a Federal Rule of Civil Procedure.” Verizon Delaware, Inc. v. Covad Commc'ns Co., 377 F.3d 1081, 1091 (9th Cir. 2004). In particular, the Ninth Circuit has held that “granting a defendant's anti-SLAPP motion to strike a plaintiff's initial complaint without granting the plaintiff leave to amend would directly collide with Fed.R.Civ.P. 15(a)'s policy favoring liberal amendment.” Id.
The purpose of the anti-SLAPP statute, the early dismissal of meritless claims, is still served if plaintiffs eliminate the offending claims from their original complaint. If the offending claims remain in the first amended complaint, the anti-SLAPP remedies, including costs and attorney's fees, remain available to defendants. See id.
Here, the Court finds that Plaintiff's Complaint fails to state a claim. However, under the liberal amendment policy favored by Fed.R.Civ.P. 15(a), the Court will grant leave to amend. Because Plaintiff may amend his Complaint, the Court finds it would be premature to rule on Defendant's special motion to strike before it can determine the probability of Plaintiff's claims on the merits. See Verizon, 377 F.3d at 1091; Vess 317 F.3d at 1110. Accordingly, the Court will defer ruling on the special motion to strike.
Accordingly, it is hereby ORDERED:
1. Defendant's Motion to Dismiss (Doc. No. 12) under Rule 12(b)(6) is GRANTED without prejudice to Plaintiff being granted leave to amend, if appropriate.
2. Plaintiff is ordered to file and serve any amended pleading within twenty-one (21) days of this Order.
3. The Court defers consideration of the special motion to strike for reasons stated herein.