Destined to End Poorly

Optional Capital v. Akin Gump Strauss Hauer & Feld LLP, No. B275274 (D2d1 Dec. 7, 2017)

In connection with an appeal in a related case just about four years ago, we discussed how judgment collection avoidance activities like fraudulent transfers in connection with phony settlements aren’t “protected activity” under the anti-SLAPP state, even though they might be tangentially related to a litigation. 

But after remand, Plaintiff in that case went off and sued the debtor’s litigators for assisting in those activities, on various theories. The attorneys filed an anti-SLAPP motion of their own. And this time it was granted, and the Court of Appeal affirmed. 

The case against the primary defendants is that they were hiding assets by manipulating the legal process. The asset hiding was the key to the claim. In contrast, the new case against the litigators is entirely based on what they did in the litigation. A client’s nefarious purpose does not render an attorney’s litigation activities unprotected. There’s a difference between using the legal process as cover for your asset hiding—which isn’t protected—and conducting that process itself—which is. 

Which isn’t to say there can never be some liability if litigators are in cahoots with their clients in manufacturing a bogus litigation. But that’s a question for the “success” prong of the anti-SLAPP analysis. To show that, Plaintiff would need to provide evidence of acts or statements that are not privileged under Civil Code § 47(b)’s absolute privilege for statements made in connection with a litigation. Plaintiffs didn’t do that here.

Affirmed.

Fraudlent Transfers Are Not Protected Actity, Even if Accomplished Through a Collusive Settlement

Optional Capital v. Das Corporation, No. B241244 (D2d1 Jan 15, 2014)

The effort it would take to explain the convoluted facts in this case significantly outweighs any procedural interest, so I’ll try to be brief. Generally speaking, defendants are individuals and companies that are alleged to have raided plaintiff’s assets to the tune of $35 million. As part of what the court describes as “an extremely tangled thicket of legal proceedings in both state and federal court, as well as in Switzerland,” plaintiff got a judgment against some of defendants. In this case, plaintiff is trying to collect on its judgment by suing other defendants as the beneficiaries of fraudulent transfers. Somewhere in the thicket of legal proceedings there was a settlement between the judgment debtor defendants and one of the fraudulent transferee defendants. Plaintiff says that it was collusive—part a conspiracy to divert some funds out of a recently unfrozen Swiss bank account so that plaintiff couldn’t execute against it. As seems to happen any time a complaint references some other litigation, defendants filed an anti-SLAPP motion and a demurrer on the Civil Code § 47(c) litigation privilege, both of which the trial court granted.

Not so, said the court of appeal. This case does not arise from protected activity. No doubt, settlement-related activity can sometimes be “protected activity,” as defined in Code of Civil Procedure § 425.16(e). Just because a collusive settlement was alleged to have been a means by which the debtor defendants accomplished their fraudulent transfers does not mean that plaintiff is suing them and the fraudulent transferee defendants for the act of entering a settlement. They are instead being sued engaging in a scheme to shuffle money around avoid the debtor defendants’ obligations on the judgment. That claim does not “arise from protected activity.” In any event, plaintiff showed a likelihood of success on its fraudulent transfer theory. And similarly, as to the demurrer, although the litigation privilege might apply to statements made in settlement negotiations, it does not apply when a lawsuit is based on a separate, non-communicative, wrongful act, like a conspiracy to transfer funds out of the clutches of one’s creditors for lack of reasonably equivalent value.

Reversed.