Opinion
B321873
05-26-2023
CITY NATIONAL BANK, Plaintiff and Respondent, v. LAW OFFICE OF JEREMY TENSER, ADAM JEFFREY TENSER, Defendants and Appellants.
Law Office of Jeremy Tenser and Adam J. Tenser for Defendants and Appellants. Ervin, Cohen & Jessup, Byron Z. Moldo, Kenneth P. Hsu and Michael C. Lieb for Plaintiff and Respondent.
NOT TO BE PUBLISHED
APPEAL from an order of the Superior Court of California. No. 19SMCV01709 Mark H. Epstein, Judge. Affirmed.
Law Office of Jeremy Tenser and Adam J. Tenser for Defendants and Appellants.
Ervin, Cohen & Jessup, Byron Z. Moldo, Kenneth P. Hsu and Michael C. Lieb for Plaintiff and Respondent.
ZUKIN, J. [*]
Appellants Adam Jeremy Tenser and the Law Offices of Jeremy Tenser (collectively Tenser) appeal the trial court's order denying their special motion to strike brought under Code of Civil Procedure section 425.16 and awarding sanctions to respondent City National Bank (CNB). Tenser, a business customer of CNB, responded to CNB's loan collection actions with a "cease-and-desist" letter. After CNB filed suit on the loan, Tenser filed two successive untimely special motions to strike, asserting the letter was protected conduct and shielded by the litigation privilege of Civil Code section 47. Both times, the trial court rejected his arguments. We affirm.
All statutory references herein are to the Code of Civil Procedure unless otherwise noted.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
1. The Parties' Banking Relationship
In December 2015, Tenser obtained a "Basic Business Builder" (BBB) line of credit pursuant to a BBB Agreement with CNB in the amount of $50,000 (the Loan). Adam Tenser, an attorney licensed to practice in California, personally guaranteed the Loan.
The BBB Agreement was formed through the mechanism of an exchange of documents and Tenser's subsequent use of the Loan proceeds. First, Adam Tenser completed a loan application stating if the loan application was approved, CNB would mail Tenser a copy of the BBB Agreement, pursuant to which Tenser would agree "to be bound by all of the terms and conditions" set forth in the BBB Agreement. Shortly after Tenser completed the loan application, CNB mailed a copy of the BBB Agreement to Tenser, which also provided use of the funds would constitute Tenser's acceptance of its terms.
Tenser used the Loan funds and in August 2018, applied for and obtained an additional line of credit known as a Business Overdraft Line of Credit (BOL).
In January 2019, CNB learned Tenser had delinquent obligations with other creditors. CNB terminated the Loan under section 19 of the BBB Agreement and cancelled the BOL. CNB requested payment of the increased amounts due on the Loan pursuant to section 14.2 of the BBB agreement.
Section 14.2 provides in part that if the Loan was terminated by either party for an event other than default, a minimum payment became due, which was the sum of: "(a) the greater of (i) accrued and unpaid interest, plus any late payment fees, plus any annual fee, plus any other charges and fees, plus 5.00% of the New Balance, or (ii) $100 (or the New Balance as of the Statement Date if less than $100); plus [¶] (b) any past due amounts." "New Balance" is defined as including the previous balance, any advances or other debits, minus any payments or credits, and fees or interest charged.
In response to CNB's actions, on February 11, 2019, Tenser sent a "cease-and-desist" letter to CNB, asserting that CNB had wrongfully declared the Loan and BOL in default. Tenser asserted the BBB Agreement was invalid, and Tenser would seek injunctive relief and restitution if CNB did not reinstate the Loan and BOL.
On February 20, 2019, CNB responded that CNB was within its rights to cancel the Loan and BOL at any time, regardless of whether Tenser was in default.
In March and April 2019, Tenser failed to make the minimum payments due on the Loan. This default triggered section 19 of the BBB Agreement, pursuant to which all amounts owed CNB became due and owing.
2. Complaint, First Anti-SLAPP Motion, and First Appeal
On September 26, 2019, CNB filed its complaint against Tenser for breach of contract, open book account, account stated, and conversion, seeking $49,761 in principal on the Loan, plus late fees, interest, and attorney fees. As alleged in the complaint, the basis for CNB's termination of the Loan was Tenser's adverse credit history and his failure to pay the Loan.
On July 8, 2022, Tenser filed a cross-complaint for fraud, interference with prospective economic advantage, unfair competition, negligence and racketeering. Tenser's cross-complaint is not at ig8ssue here.
In response, on January 17, 2020, Tenser filed a special motion to strike. Tenser claimed its "cease-and-desist" letter was protected activity, and the complaint did not have a reasonable probability of prevailing on the merits because the cease-and-desist letter was protected by the litigation privilege of Civil Code section 47. Tenser also argued the parties never properly entered into the BBB Agreement, thereby negating the breach of contract claim, and the complaint failed to state a cause of action on the other three claims.
CNB opposed, asserting the motion was untimely as it was filed more than 60 days after its complaint. (§ 425.16, subd. (f).) Further, CNB argued its debt collection claims did not arise from protected activity. CNB submitted declarations authenticating the documentary evidence establishing the existence of the Loan and BOL, including the BBB Agreement.
On August 31, 2020, the trial court denied the motion, after concluding that although the motion was not filed within 60 days of the complaint, it would exercise its discretion to hear the motion. The court held Tenser's liability was based on its failure to pay the Loan under the BBB Agreement, finding the cease-and-desist letter was "incidental" to Tenser's failure to pay the Loan. Further, CNB demonstrated a likelihood of prevailing on the merits because the cease-and-desist letter did not provide immunity from an otherwise existing breach of contract or tort claim.
Tenser appealed the trial court's denial of the anti-SLAPP motion on October 26, 2020. After multiple defaults, this court dismissed the appeal on August 2, 2021. This court denied Tenser's motion to reinstate the appeal on September 1, 2021.
3. Second Anti-SLAPP Motion and This Appeal
On March 8, 2022, Tenser filed a second anti-SLAPP motion in the trial court. The motion reiterated the arguments of Tenser's first motion, asserting the cease-and-desist letter was protected activity and CNB did not have a reasonable probability of prevailing on the merits because Tenser's refusal to pay fell within the litigation privilege of Civil Code section 47.
CNB's opposition asserted Tenser's second motion was procedurally defective because (1) it was essentially a motion for reconsideration of the trial court's previous order denying Tenser's special motion to strike, was untimely under section 1008 and did not show any "new or different facts, circumstances, or law" as required by section 1008; and (2) even if it was not a motion for reconsideration, the second motion was untimely under section 425.16, subdivision (f), which required any motion brought under the statute to be filed within 60 days of the operative complaint. CNB requested sanctions of $2,970.
On April 15, 2022, the trial court found the second motion was an untimely motion for reconsideration and nothing new had been presented in support of reconsideration. After striking the motion, the court did not revisit the merits of the first motion, pointing out that even if the court reached the merits, "the ruling would not change." The court found the motion was frivolous and awarded $2,970 in sanctions pursuant to section 128.5. Two weeks later, Tenser filed a motion to reconsider the second motion. After being threatened with contempt, Tenser withdrew their motion for reconsideration.
DISCUSSION
Tenser argues the cease-and-desist letter was a protected pre-litigation communication sent to CNB disputing CNB's loan collection activities and the letter is protected by the litigation privilege. CNB responds Tenser's motions were untimely or improper motions for reconsideration, and they fail on the merits because Tenser's mere refusal to pay an outstanding debt is not protected activity. We need not consider CNB's procedural allegations because we conclude Tenser cannot meet the first step of the anti-SLAPP analysis-the gravamen of CNB's complaint was Tenser's poor credit and the failure to pay the Loan, not the cease-and-desist letter.
A. Code of Civil Procedure Section 425.16
A SLAPP suit is a meritless lawsuit brought primarily to inhibit or punish the exercise of the constitutional right of petition or free speech. (§ 425.16, subd. (a); Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 60.) The purpose of the anti-SLAPP statute is to weed out early in litigation meritless claims arising from protected activity. To that end, the Legislature has declared the statute "shall be construed broadly." (Central Valley Hospitalists v. Dignity Health (2018) 19 Cal.App.5th 203, 216; § 425.16, subd. (a).)
The trial court's analysis of an anti-SLAPP motion is two-fold. (Wilson v. Cable News Network, Inc. (2019) 7 Cal.5th 871, 884 (Wilson).) First, the trial court determines whether the moving party (typically, the defendant) has made a threshold showing the challenged claims arose from a protected activity. (§ 425.16, subd. (b)(1); Briganti v. Chow (2019) 42 Cal.App.5th 504, 508.) If the movant makes this threshold showing, the burden shifts to the opposing party to demonstrate a probability of prevailing on the claims. (Ibid.)
If the defendant fails to meet its burden on the first step, the trial court should deny the motion; it need not proceed to the next step to evaluate the merits. (Sheley v. Harrop (2017) 9 Cal.App.5th 1147, 1162.) "A cause of action is subject to dismissal under the statute only if both steps of the anti-SLAPP analysis are met." (Malin v. Singer (2013) 217 Cal.App.4th 1283, 1293; Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 278-279.)
We review the trial court's ruling granting the anti-SLAPP motion de novo. (Monster Energy Co. v. Schechter (2019) 7 Cal.5th 781, 788.) As a result, we will employ the same two-step procedure as did the trial court in determining if Tenser's anti-SLAPP motion was properly denied. (Weeden v. Hoffman (2021) 70 Cal.App.5th 269, 282.)
B. Analysis
To satisfy their burden on the first step of the anti-SLAPP statute, Tenser must make a prima facie showing CNB's claims "arose from" an act performed in furtherance of Tenser's right of petition or free speech. (Park v. Board of Trustees of California State University (2017) 2 Cal.5th 1057, 1063 [a claim is the "activity allegedly giving rise to liability"].) Tenser are not required to prove their conduct is constitutionally protected as a matter of law. (Flatley v. Mauro (2006) 39 Cal.4th 299, 319.) The question is only whether Tenser made a prima facie showing the activity underlying the claims alleged against them is statutorily protected. (Wilson, supra, 7 Cal.5th at p. 888.) In determining whether the claims arise from protected activity, the trial court does not consider the legitimacy of plaintiff's claims. (Coretronic Corp. v. Cozen O'Connor (2011) 192 Cal.App.4th 1381, 1388 ["Arguments about the merits of the claims are irrelevant to the first step of the anti-SLAPP analysis"].)
"In deciding whether the 'arising from' requirement is met, a court considers 'the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based.' (§ 425.16, subd. (b).)" (City of Cotati v. Cashman (2002) 29 Cal.4th 69, 79 (Cotati); see also Wittenberg v. Bornstein (2020) 50 Cal.App.5th 303, 312.) The trial court must look beyond plaintiff's characterization of defendant's conduct to determine, based on competent evidence, whether the plaintiff's claims arise from protected speech or conduct. (See Stewart v. Rolling Stone LLC (2010) 181 Cal.App.4th 664, 679 [the court does "not evaluate the first prong of the anti-SLAPP test solely through the lens of a plaintiff's cause of action"].) The "focus is not the form of the plaintiff's cause of action but, rather, the defendant's activity that gives rise to his or her asserted liability-and whether that activity constitutes protected speech or petitioning." (Navellier v. Sletten (2002) 29 Cal.4th 82, 92.)
Here, Tenser argues protected written correspondence forms the basis of CNB's action. Tenser points to the complaint's allegation that in response to CNB's notice of cancellation, on February 11, 2019, Tenser responded with the cease-and-desist letter in which Tenser disputed the debt. However, despite the complaint's recitation of facts regarding the cease-and-desist letter, this contextual allegation is not the basis of CNB's complaint. Rather, the gravamens of the complaint are the allegations Tenser had poor credit, failed to make the required minimum monthly payments, and upon such default, Tenser failed to pay all amounts due as required by the Loan Agreement. The four causes of action asserted in the complaint arise from Tenser's default under the Loan, the act "underlying" the cause of action. (Cotati, supra, 29 Cal.4th at p. 78; Century 21 Chamberlain &Associates v. Haberman (2009) 173 Cal.App.4th 1, 7.)
As we conclude Tenser cannot show their conduct was protected activity, we need not reach the second step of the anti-SLAPP analysis. (Sheley v. Harrop, supra, 9 Cal.App.5th at p. 1162.)
C. Sanctions
Tenser argues the trial court abused its discretion in awarding sanctions because no reasonable attorney would agree the second motion was totally devoid of merit. Tenser contends it was reasonable for Tenser to believe the allegations of refusal to pay are based upon the cease-and-desist letter and the motion had objective merit because "other than not paying the alleged debt, the only conduct alleged as the basis for damages . . . is refusing to pay."
Section 425.16 permits the trial court to award sanctions where "a special motion to strike is frivolous or is solely intended to cause unnecessary delay." (§ 425.16, subd. (c)(1).) "Frivolous in this context means that any reasonable attorney would agree the motion was totally devoid of merit." (Gerbosi v. Gaims, Weil, West &Epstein, LLP (2011) 193 Cal.App.4th 435, 450.) We review an award of sanctions for abuse of discretion. (Alfaro v. Waterhouse Management Corp. (2022) 82 Cal.App.5th 26, 37.)
Here, sanctions were justified. The trial court found the second motion to strike reiterated arguments already made and rejected in August 2020. Under section 1008, subdivision (a), given the first motion was rejected on the merits, and Tenser filed a duplicate motion that failed to present new facts or law to the court, any reasonable attorney would conclude the motion was devoid of merit.
DISPOSITION
The order of the superior court is affirmed. Respondent is to recover its costs on appeal.
We concur: CURREY, Acting P. J. COLLINS, J.
[*] Judge of the Los Angeles County Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.