RGC Gaslamp, LLC v. Ehmcke Sheet M, Inc.

• Decision Date: 23 October 2020
• Docket Number: D076594,D075615
• Parties: RGC GASLAMP, LLC, Plaintiff and Appellant, v. EHMCKE SHEET METAL CO., INC., Defendant and Appellant. RGC Gaslamp, LLC, Plaintiff and Appellant, v. Ehmcke Sheet Metal Co., Inc., Defendant and Respondent.
• Court: California Court of Appeals Court of Appeals

56 Cal.App.5th 413

270 Cal.Rptr.3d 425

RGC GASLAMP, LLC, Plaintiff and Appellant,

v.EHMCKE SHEET METAL CO., INC., Defendant and Appellant.

RGC Gaslamp, LLC, Plaintiff and Appellant,

v.Ehmcke Sheet Metal Co., Inc., Defendant and Respondent.

D075615

D076594

Court of Appeal, Fourth District, Division 1, California.

Filed October 23, 2020

CGS3, Gregory S. Markow, San Diego, Sean Michael Gaffney and Jamie Altman Buggy, San Diego, for Plaintiff and Appellant in Nos. D07615 and D076594.

Solomon Ward Seidenwurm & Smith, Thomas Landers, San Diego, and Leah Suzanne Strickland, San Diego, for Defendant and Appellant and for Defendant and Respondent.

DATO, J.

Subcontractor Ehmcke Sheet Metal Company (Ehmcke) recorded a mechanic's lien to recoup payment due for sheet metal fabrication and installation work done on a luxury hotel project in downtown San Diego. Project owner RGC Gaslamp, LLC (RGC) secured a bond to release the lien. Thereafter Ehmcke filed three successive mechanic's liens, each identical to the first, prompting RGC to sue it for quiet title, slander of title, and declaratory and injunctive relief. The trial court granted Ehmcke's special motion to strike under the anti-SLAPP statute. ( Code Civ. Proc., § 425.16.) RGC appeals that ruling and the subsequent ruling on attorney's fees.¹

The trial court found that Ehmcke met its moving burden because the filing of even an invalid lien is protected petitioning activity. Thereafter, the court found that RGC failed to make a prima facie showing that its sole remaining cause of action for slander of title could withstand application of the litigation privilege. RGC appeals both findings, arguing that the duplicative filing of mechanic's liens after the posting of a bond is not protected activity. Relying heavily on A.F. Brown Electrical Contractor, Inc. v. Rhino Electric Supply, Inc. (2006) 137 Cal.App.4th 1118, 41 Cal.Rptr.3d 1 ( A.F. Brown ), RGC claims Ehmcke could not have filed duplicative liens in good faith while seriously contemplating litigation.

As we explain, RGC erroneously imports substantive requirements of the litigation privilege into the first step of the anti-SLAPP inquiry. At prong one of the anti-SLAPP inquiry, a defendant need only show a prima facie case that the activity underlying plaintiff's action is protected, not that its acts were ultimately lawful. Moreover, even if the good faith and serious contemplation criteria in A.F. Brown applied here, Ehmcke met that moving burden once its erroneously excluded reply declarations are considered. With the burden shifted on prong two, RGC failed to make a prima facie showing that the litigation privilege did not bar its slander-of-title cause of action. The anti-SLAPP motion was thus properly granted, and we likewise affirm the subsequent attorney's fees and costs award.

FACTUAL AND PROCEDURAL BACKGROUND²

RGC is the developer and owner of the Pendry Hotel in downtown San Diego. Ehmcke performed sheet metal installation and fabrication for the project and alleged it was not paid after completing its subcontracting work in April 2017. In September 2017, Ehmcke filed and recorded a mechanic's lien (first lien) for $257,978 against the property. The following month, RGC secured and recorded a bond from Liberty Mutual for $322,473 to release the first lien. In December, Ehmcke filed a second mechanic's lien identical to the first lien.

A few months passed. On April 10, 2018, Ehmcke filed and recorded a series of documents in which it withdrew the first and second liens and filed a third identical mechanic's lien for the same work.³ RGC once again obtained a bond from Liberty Mutual to release the third lien, recording the instrument in June. Then on July 5, 2018, Ehmcke withdrew the third lien and filed a fourth lien on the project that was duplicative of the first, second, and third liens.

RGC initiated this action on July 19, filing a verified complaint for quiet title, slander of title, and declaratory and injunctive relief. Attached as exhibits were copies of the four recorded mechanic's liens, withdrawals of the first, second, and third liens, and surety bonds for the first and third liens. Ehmcke responded by filing a special motion to strike pursuant to the anti-SLAPP statute, Code of Civil Procedure section 425.16, subdivision (b), contending the claims all arose from protected petitioning activity. It further argued that the quiet title and declaratory relief claims were mooted by its release of all four liens, while the remaining slander of title claim was barred by the litigation privilege.

Attached to its anti-SLAPP motion was a declaration by Ehmcke Vice President, Billy Taylor. Taylor stated that Ehmcke had not been paid for sheet metal installation and fabrication work at the Pendry Hotel. Subsequently, it recorded four mechanic's liens, all since released. RGC's lawsuit challenged the fourth lien, recorded on July 5, 2018. According to Taylor, "Before Ehmcke retained Solomon Ward as counsel it was not properly advised of the legal and statutory scheme regulating mechanic's lien law in California." But after retaining the firm, Ehmcke promptly released the fourth mechanic's lien. As of August 28, 2018, there had been no mechanic's liens recorded against the property, and Taylor asserted that "Ehmcke does not intend to record any additional mechanic's liens."

RGC opposed the anti-SLAPP motion, arguing that the filing of duplicative mechanic's liens was neither protected petitioning activity nor covered by the litigation privilege. As it does on appeal, RGC relied primarily on A.F. Brown, supra , 137 Cal.App.4th 1118, 41 Cal.Rptr.3d 1, asserting that although the first lien was likely privileged, subsequent identical liens were not. RGC claimed that Ehmcke could not and did not file the second, third, and fourth mechanic's liens in good faith or while a lawsuit was under serious consideration. Describing the statutory scheme as protecting both contractors and owners, RGC maintained that the reasons for treating a first mechanic's lien as privileged did not extend to subsequent duplicative liens. Because the mechanic's lien laws ( Civ. Code, § 8200 et seq. ) make no provision for repeat liens after an owner posts a release bond, RGC suggested that permitting such duplicative liens would render statutory bond protections afforded to owners under Civil Code section 8424 illusory.⁴

In conjunction with its opposition, RGC submitted a declaration by attorney Gregory Markow authenticating the various recorded documents attached as exhibits to the complaint. Markow also authenticated a demand letter sent to Ehmcke's president on July 16, 2018. In it, Markow told Ehmcke that the fourth lien was untimely filed (§ 8414) and therefore invalid. Warning that Ehmcke's failure to release the lien might damage RGC in excess of $2 million, the demand letter stated that RGC would pursue its legal remedies if Ehmcke did not release the lien by July 20.

Ehmcke responded that RGC had conflated the two prongs of the anti-SLAPP inquiry by using the litigation privilege to define the scope of protected activity. According to Ehmcke, anti-SLAPP protection was not negated by its filing of a statutorily invalid mechanic's lien. Nor could RGC show its claims had minimal merit when the recording of even an invalid mechanic's lien was covered by the litigation privilege. Ehmcke contested RGC's assertion that it had acted in bad faith, submitting three new declarations with its reply.⁵

Both parties filed evidentiary objections. RGC objected to the reply evidence in its entirety. The court struck all three reply declarations, citing the general rule that new evidence may not be submitted by an anti-SLAPP movant on reply. (See Jay v. Mahaffey (2013) 218 Cal.App.4th 1522, 1537, 161 Cal.Rptr.3d 700 ( Jay ).)

At the hearing, the trial court gave its tentative ruling. Ehmcke had to show that RGC's action arose from its protected activity, and the filing of a mechanic's lien met that burden. The burden then shifted to RGC to establish a probability of prevailing on the merits. RGC could not do so because although what Ehmcke did was wrong, the filing of the fourth mechanic's lien remained protected by the litigation privilege (§ 47, subd. (b)). Following lengthy argument by both sides, the court confirmed its tentative, while expressing discomfort with the possibility that an owner like RGC would have no judicial remedy when faced with duplicative liens. As the court explained in its minute order, "The recording of a mechanic's lien satisfies Ehmcke's prong I ‘arising out of’ anti-SLAPP burden and is an act absolutely privileged pursuant to Civil Code § 47(b), thereby also precluding RGC from satisfying its prong II ‘likelihood of success on the merits’ burden." Although the fourth lien may have been untimely, improper, or statutorily unauthorized, the litigation privilege "is absolute and applies irrespective of Ehmcke's evil motives or the total lack of merit of the recorded lien."

Having prevailed on its anti-SLAPP motion, Ehmcke sought an award of attorney's fees and costs. ( Code Civ. Proc., § 425.16, subd. (c).) The court granted the request, awarding Ehmcke $30,000 in attorney's fees and $1,062 in costs.

DISCUSSION

RGC challenges the anti-SLAPP ruling, arguing the filing of repetitive mechanic's liens is protected by neither the anti-SLAPP statute nor the litigation privilege. To the extent we are inclined to reverse the trial court's anti-SLAPP ruling, Ehmcke cross-appeals the evidentiary ruling striking all three declarations submitted on reply. As we explain, the anti-SLAPP motion was properly granted. The filing of a mechanic's lien constitutes protected activity, even if the lien was invalid or otherwise improper. Although we disagree with A.F. Brown 's suggestion that an anti-SLAPP moving party must establish that a mechanic's lien must be filed in good faith and in serious contemplation of litigation, those requirements...