Strawn v. Morris Polich & Purdy, LLP

• Decision Date: 04 January 2019
• Docket Number: A150562
• Citation: 30 Cal.App.5th 1087,242 Cal.Rptr.3d 216
• Parties: Dennis STRAWN et al., Plaintiffs and Appellants, v. MORRIS POLICH & PURDY, LLP et al., Defendants and Respondents.
• Court: California Court of Appeals Court of Appeals

30 Cal.App.5th 1087

242 Cal.Rptr.3d 216

Dennis STRAWN et al., Plaintiffs and Appellants,

v.MORRIS POLICH & PURDY, LLP et al., Defendants and Respondents.

A150562

Court of Appeal, First District, Division 2, California.

Filed January 4, 2019

Law Offices of Paul J. O'Rourke, Jr., Paul J. O'Rourke, Jr., Barr & Mudford, LLP, John Douglas Barr, for Appellants.

Morris Polich & Purdy, LLP, Gary A. Hamblet, Los Angeles, John Sang-Kyu Na, Roeca Haas Montes De Oca, LLP, Russell S. Roeca, Kyle Montes De Oca, Audrey Tam, Daniel Hager, San Francisco, for Respondents.

Kline, P.J.

After their insurance company denied coverage for a home and vehicle that were damaged or destroyed in a fire, the owners sued the insurer and its attorneys. The present appeal is from the dismissal of the owners’ claims against the insurer's attorneys for invasion of privacy and financial elder abuse. The owners contend the trial court erred in sustaining the attorneys’ demurrer without leave to amend. We affirm as to the cause of action for financial elder abuse and reverse as to the cause of action for invasion of privacy.

BACKGROUND

Appellants’ home and pickup, which were insured by State Farm General Insurance Company (State Farm), were "damaged and destroyed" by fire on June 1, 2009. They immediately notified State Farm.

Dennis Strawn was prosecuted for arson in connection with the fire, but the case was ultimately dismissed on February 19, 2013.

In August 2015, State Farm informed appellants that it was denying their claims on the ground that Dennis Strawn had intentionally set the fire and Diane Strawn had fraudulently concealed evidence of this wrongful conduct.

On August 8, 2016, appellants filed a complaint alleging causes of action against State Farm for breach of contract, breach of the covenant of good faith and fair dealing, intentional infliction of emotional distress, invasion of privacy and elder abuse. The fourth and fifth causes of action, for invasion of privacy and elder abuse, were also alleged against Douglas K. Wood, the attorney who represented State Farm, and Morris Polich & Purdy, LLP (MPP), the law firm in which Wood was a partner.

The first three causes of action, although alleged only against State Farm, set the stage for appellants’ claims against respondents. The gist of these claims was that State Farm breached its contract with appellants and the covenant of good faith and fair dealing by seeking to avoid its obligations by conduct including insisting on receipt of information from appellants that was not relevant to the cause of the fire, encouraging a criminal prosecution of Dennis Strawn for arson, and denying coverage unreasonably and in bad faith.¹

In the fourth cause of action, for invasion of privacy, appellants alleged that Wood, as representative for State Farm, repeatedly demanded that appellants produce financial records, including tax returns; that appellants were aware that tax returns are privileged against disclosure and refused to waive the privilege; that appellants authorized their accountant to provide to Wood and State Farm financial records that were used to prepare the tax returns, but not the actual tax returns; that the accountant's office mistakenly provided the returns along with the other financial information; and that Wood, despite having been expressly informed that appellants were not waiving privilege, failed to advise appellants of the error and sent the returns to State Farm and the forensic accounting firm it hired, which used information from the returns in the analysis it provided to State Farm. Appellants alleged that in "publishing" the tax returns to "third parties," including State Farm employees, Wood and MPP violated their right to privacy under article 1, section 1, of the California Constitution.

In the fifth cause of action, for elder abuse, appellants alleged that Wood and MPP "assisted" State Farm in "retaining funds belonging rightfully to [appellants] for "its wrongful use or with the intent to defraud [appellants] or both" in violation of Welfare and Institutions Code section 15610, subdivision (a)(2).²

Respondents filed a demurrer to the fourth and fifth causes of action. After a hearing, the trial court sustained the demurrer without leave to amend and dismissed the complaint as to Wood and MPP. Judgment of dismissal was filed on December 7, 2016, and this appeal followed.

DISCUSSION

On appeal from a judgment of dismissal entered after a general demurrer is sustained, "we examine the complaint de novo to determine whether it alleges facts sufficient to state a cause of action under any legal theory" ( McCall v. PacifiCare of Cal. Inc. (2001) 25 Cal.4th 412, 415, 106 Cal.Rptr.2d 271, 21 P.3d 1189 ), assuming the truth of properly pleaded facts but not " ‘ "contentions, deductions or conclusions of fact or law." ’ " ( Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126, 119 Cal.Rptr.2d 709, 45 P.3d 1171.) When the demurrer is sustained without leave to amend, the burden of proving there is a reasonable possibility the defect can be cured by amendment " ‘is squarely on the plaintiff.’ " ( Ibid. )

I.

The trial court sustained the demurrer to the invasion of privacy claim on the ground that it was barred by the litigation privilege. ( Civ. Code, § 47, subd. (b)(2).) With the "principal purpose" of affording litigants and witnesses "the utmost freedom of access to the courts without fear of being harassed subsequently by derivative tort actions," 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." ( Silberg v. Anderson (1990) 50 Cal.3d 205, 212-213, 266 Cal.Rptr. 638, 786 P.2d 365.) "The privilege ‘is not limited to statements made during a trial or other proceedings, but may extend to steps taken prior thereto, or afterwards.’ ( Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1057, 39 Cal.Rptr.3d 516, 128 P.3d 713.)" ( Action Apartment Assn., Inc. v. City of Santa Monica (2007) 41 Cal.4th 1232, 1241, 63 Cal.Rptr.3d 398, 163 P.3d 89 ( Action Apartment Assn . ).)

As the trial court explained, appellants’ cause of action for invasion of privacy was based on Wood's alleged transmittal of appellants’ tax returns to State Farm. The court found the litigation privilege applicable because at the time the returns were transmitted, respondents were representing State Farm "in anticipation of a possible lawsuit concerning the claim made by [appellants] for the fire damage to their residence and vehicle." Appellants challenge this determination by arguing that their claim is based on Wood's conduct , while the litigation privilege applies only to communication, and that this conduct occurred while State Farm was investigating the insurance claim, well before any litigation.

Appellants’ first point is not persuasive. " ‘The distinction between communicative and noncommunicative conduct hinges on the gravamen of the action . [Citations.] That is, the key in determining whether the privilege applies is whether the injury allegedly resulted from an act that was communicative in its essential nature . [Citations.] The following acts have been deemed communicative and thus protected by the litigation privilege: attorney prelitigation solicitations of potential clients and subsequent filing of pleadings in the litigation [citation], and testimonial use of the contents of illegally overheard conversation [citation]. The following acts have been deemed noncommunicative and thus unprivileged: prelitigation illegal recording of confidential telephone conversations [citation]; eavesdropping on a telephone conversation [citation]; and physician's negligent examination of patient causing physical injury [citation].’ " ( Action Apartment Assn., supra, 41 Cal.4th at p. 1248, 63 Cal.Rptr.3d 398, 163 P.3d 89, quoting Rusheen v. Cohen, supra, 37 Cal.4th at p. 1058, 39 Cal.Rptr.3d 516, 128 P.3d 713.)

Here, the gravamen of appellants’ claim is that Wood improperly provided their tax returns to State Farm and its accountants despite appellants’ assertion of their privilege to not disclose the returns. The cause of action for invasion of privacy alleged that Wood "passed the wrongfully obtained tax returns along to" and "publish[ed]" appellants’ "private tax returns to third parties." The very language of the complaint demonstrates that it was based on Woods’ communication of information to State Farm and its accountants. Appellants alleged no "independent, noncommunicative, wrongful act" ( Jacob B. v. County of Shasta (2007) 40 Cal.4th 948, 957, 56 Cal.Rptr.3d 477, 154 P.3d 1003 ) as the basis of their claim.

Appellants’ second argument, however, has merit. "A prelitigation communication is privileged only when it relates to litigation that is contemplated in good faith and under serious consideration." ( Action Apartment Assn., supra, 41 Cal.4th at p. 1251, 63 Cal.Rptr.3d 398, 163 P.3d 89.) "Whether a prelitigation communication relates to litigation that is contemplated in good faith and under serious consideration is an issue of fact." ( Ibid. ) The Supreme Court noted the example of Eisenberg v. Alameda Newspapers, Inc. (1999) 74 Cal.App.4th 1359, 88 Cal.Rptr.2d 802 ( Eisenberg ), which held that the trial court erred in granting summary judgment on the basis of the litigation privilege because " ‘[i]t remain[ed] a triable issue of fact whether ... imminent litigation was seriously proposed and actually contemplated in good faith as a means of resolving the dispute between [the parties].’ " ( Action Apartment Assn. , at p. 1251, 63 Cal.Rptr.3d 398, 163 P.3d 89, quoting Eisenberg, at p. 1381, 88 Cal.Rptr.2d 802.) As Eisenberg explained, first, "the ‘mere possibility or subjective anticipation’ of litigation is insufficient; it is necessary that there be proof of ‘some actual...