Many things are said in anticipation of a settlement—-especially during the give and take of mediation. In this Article, Woodland Hills personal injury attorney Barry P. Goldberg separates what is actionable from what is not. It is common for lawyers to make promises in mediation in order to induce a settlement. A hot issue these days concerns the handling of medical liens. Often an attorney representing a personal injury plaintiff will promise the defendant and its insurer that the plaintiff and plaintiff’s attorney will satisfy all outstanding medical liens as part of the settlement. What happens when those liens are not satisfied out of the settlement proceeds?
In a recent unpublished case, a hospital sued a liability insurer and the plaintiff’s lawyer for failing to pay a lien of which they had notice. The insurer turned around and cross-complained against the plaintiff and her attorney for indemnity, declaratory relief, fraud and breach of contract. Central to the cross-complaint was the allegation that the plaintiff’s attorney represented after the mediation that the lien would be paid from the settlement proceeds and he was in the process of negotiating the lien. The insurer further alleged that, had the attorney’s representations not been made, it would not have agreed to the settlement.
The attorney responded by filing a special motion to strike the first amended cross-complaint pursuant to Code of Civil Procedure section 425.16 (an anti-SLAPP motion). He asserted the claims made against him in the cross-complaint arose out of alleged oral representations made during negotiation of a settlement that avoided litigation; they argued the oral representations constituted petitioning activity protected by section 425.16. The Trial Court denied the anti-SLAPP motion and imposed sanctions against the attorney for filing a frivolous motion. The attorney appealed.
The Court of Appeal found that, as to the fraud, indemnity and declaratory relief the gravamen or principal thrust of these causes of action—’the allegedly wrongful and injury-producing conduct that provides the foundation for the claims’ is the alleged false promise that the attorney would pay the lien out of the proceeds of plaintiff’s settlement when he had no intention of doing so. This allegedly resulted in the harm to the insurer: it executed the settlement agreement, tendered payment to plaintiff and her attorney, and was sued when the lien was not paid. The court noted:
Statements made before an ‘official proceeding’ or in connection with an issue under consideration or review by a legislative, executive, or judicial body, or in any other ‘official proceeding,’ as described in clauses (1) and (2) of section 425.16, subdivision (e), are not limited to statements made after the commencement of such a proceeding. Instead, statements made in anticipation of a court action or other official proceeding may be entitled to protection under the anti-SLAPP statute. ‘[J]ust as communications preparatory to or in anticipation of the bringing of an action or other official proceeding are within the protection of the litigation privilege of Civil Code section 47, subdivision (b) [citation], … such statements are equally entitled to the benefits of section 425.16.’ [Citations.]” “[A] prelitigation statement falls within clause (1) or (2) of section 425.16, subdivision (e) if the statement ‘”concern[s] the subject of the dispute” and is made “in anticipation of litigation ‘contemplated in good faith and under serious consideration'” [citation].’
Plaintiff and her attorney, met with defendant’s attorney and representatives of her insurer, to mediate plaintiff’s personal injury claim against defendant, for damages arising out of an accident. The court was hard pressed to interpret the mediation as anything other than an attempt to settle plaintiff’s claim in order to avoid litigation that would have been filed if the matter had not settled.
The alleged statements on which the insurer’s fraud causes of action are based concerned the subject of the dispute; they related to expenses incurred by plaintiff as a result of the injuries for which defendant was allegedly responsible, and the liens claimed by the hospital to secure payment. Although the statements were allegedly made after the parties had reached their initial agreement to settle, the statements concerned that settlement, the insurer asserted that it relied on them in agreeing to settle, and the final written agreement had not yet been prepared.
The actionable wrong alleged in the fraud causes of action was the alleged making of promises without intent to perform them. The alleged promises concerned the subject of the dispute and were made in the course of mediation conducted in anticipation of litigation. Consequently, the court found that the statements that formed the basis of the insurer’s fraud causes of action fell within the protection of section 425.16, establishing the required threshold showing that the fraud causes of action arose from protected activity.
Once the court determined that the defendant made a threshold showing that the challenged causes of action arose from protected activity, it must then determine whether the insurer has demonstrated a probability of prevailing on those causes of action. (HMS Capital, Inc. v. Lawyers Title Co. (2004) 118 Cal.App.4th 204, 211.)
The court held that the insurer cannot prevail because the litigation privilege of Civil Code section 47, subdivision (b), precludes liability. The litigation privilege “‘may present a substantive defense plaintiff must overcome to demonstrate a probability of prevailing.'” (Rohde v. Wolf (2007) 154 Cal.App.4th 28, 38.) “‘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 have some connection or logical relation to the action. [Citations.]’ [Citation.]” (Home Ins. Co. v. Zurich Ins. Co. (2002) 96 Cal.App.4th 17, 23-24 (Home Ins.).)
The court acknowledged that the litigation privilege has been extended to communications that have some relation to anticipated litigation. (Aronson v. Kinsella (1997) 58 Cal.App.4th 254, 262.) It “‘arises at the point in time when litigation is no longer a mere possibility, but has instead ripened into a proposed proceeding that is actually contemplated in good faith and under serious consideration as a means of obtaining access to the courts for the purpose of resolving the dispute.'” (Haneline Pacific Properties, LLC v. May (2008) 167 Cal.App.4th 311, 319 (Haneline).) The privilege applies to statements made by counsel during settlement negotiations. (Home Ins., supra, 96 Cal.App.4th at p. 24.)
Accordingly, the insurer did not demonstrate a probability of prevailing under the anti-SLAPP statute, because the statements fell within the protection of the litigation privilege. Notwithstanding the reversal on those causes of action, the court affirmed the trial court as to the breach of contract cause of action arising from the formal written settlement agreement drafted after the mediation. As to that cause of action, there exists sufficient case law establishing that no privilege exists.
For more information about blog author and attorney Barry Goldberg’s civil litigation expertise, please visit his web page, Woodland Hills Civil Litigation Attorney. https://barrypgoldberg.com For more information about the article author and attorney Barry Goldberg’s Personal Injury Expertise, please visit his web site: Woodland Hills Civil Litigation Attorney; https://barrypgoldberg.com
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