Court of Appeal:
Panel Reaches Same Result As It Did in Opinion Issued May 20, Vacated May 21;Defendants Are Fugitives Being Sought by China, Now Seeking Asylum
By a MetNews Staff Writer
The “safe harbor” provision of Code of Civil Procedure §128.5 does not apply where attorney fees are sought by a plaintiff that prevails on an anti-SLAPP motion which the court finds to have been frivolous, Div. Two of the Fourth District Court of Appeal has held, reaching the same conclusion it did on May 20 in an opinion it vacated the following day.
Its revised opinion, filed Tuesday, was authored by Justice Douglas P. Miller, who also wrote the earlier fleetingly-released opinion.
The case implicates the current touchy relations between the United States and China.
San Bernardino Superior Court Judge Donna G. Garza on April 3, 2019, awarded $61,915 in attorney fees to plaintiff Changsha Metro Group Co., Ltd.—a company owned by the People’s Republic of China—after it defeated an anti-SLAPP motion brought by defendants Peng Xufeng and Jia Siyu, residents of San Bernardino County. Changsha alleges that Peng, its former chairman, received bribes totaling $18,987,025 “in return for plum construction contracts from Changsha” during the period from August 2010 to March 2017.
The arrest and extradition of the couple is being sought by China.
According to the defendants, Changsha is not the “simple municipal subway mass transit utility” it purports to be but “is a centrally planned component of China’s military industrial complex involved in developing magnetic levitation military weapons.” Peng—the first name, in China, being the surname—holds “in his head the core maglev technology that China intends to use should war with the U.S. ever break out,” the motion alleged, asserting that the lawsuit is being used to force him and his wife to return to China, and is a mode of retaliation for their having exercised their First Amendment rights to seek asylum here.
Wall Street Journal
The Wall Street Journal on July 1 reported:
“Mr. Peng, who left China in March 2017, was No. 44 on China’s 2018 50-most-wanted-fugitive list that focuses on allegations of corruption. Senior U.S. government officials in recent weeks have described China’s fugitive search, which Beijing has called ‘Operation Fox Hunt,’ as an effort to pursue political targets rather than just criminal ones.”
“Some U.S. government officials said they were alarmed China seemed to also be using civil lawsuits to pursue what should be handled through diplomatic and law-enforcement channels.”
Changsha has insisted its purpose in suing is simply to recoup funds which were improperly acquired by Peng and Jia.
Garza found that the defendants failed to establish that the lawsuit stemmed from the protected activity—the initial requisite of an anti-SLAPP motion—which the defendants alleged.
The Riverside-based appeals court on May 19, in an opinion that was not certified for publication, affirmed the denial of the anti-SLAPP motion, and on May 20, and again Tuesday, it affirmed the award of attorney fees to Changsha over the defendants’ protest that Garza made the award improperly because they were not afforded a 21-day “safe harbor” period within which to withdraw their motion.
Interplay of Statutes
In affirming Garza’s award of attorney fees, the appeals court grappled with the interplay between the anti-SLAPP statute, Code of Civil Procedure §425.16, and §128.5 of that code, traditionally thought of strictly as a sanction statute, and how three of its provisions interrelate.
Sec. 425.16(c)(1) provides that if a special motion to strike is deemed frivolous, “the court shall award costs and reasonable attorney’s fees to a plaintiff prevailing on the motion, pursuant to Section 128.5.”
In his May 20 opinion, Justice Douglas P. Miller said that §128.5 (dormant from 1994 to 2015) now authorizes both “sanctions” for bad-faith tactics and “expenses,” including attorney fees. He said that subds. (a) and (c), relating to expenses, were relevant to Changsha’s motion for fees, but that subd. (f)—providing a 21-day “safe harbor” period for withdrawing a motion after it is challenged as frivolous and before being allowed to file it with the court—pertains to sanctions and wasn’t in point.
Miller noted that §128.5(f) permits a motion for sanctions only after “the court issues an order pursuant to subdivision (a)” finding a maneuver to have been frivolous. An anti-SLAPP motion, filed prior to such a finding, he said, cannot be subject to “the sub-division (f) procedure.”
Further Briefing Sought
Two days after the opinion was issued and one day after it was withdrawn, the justices issued an order directing the parties “to submit supplemental briefs interpreting section 128.5, subdivisions (a), (c), and (f), and explaining how the subdivisions interact.”
Subd. (a) provides:
“A trial court may order a party, the party’s attorney, or both, to pay the reasonable expenses, including attorney’s fees, incurred by another party as a result of actions or tactics, made in bad faith, that are frivolous or solely intended to cause unnecessary delay.”
Subd. (c) says:
“Expenses pursuant to this section shall not be imposed except on notice contained in a party’s moving or responding papers or, on the court’s own motion, after notice and opportunity to be heard. An order imposing expenses shall be in writing and shall recite in detail the action or tactic or circumstances justifying the order.”
Subd. (f), which concerns sanctions, sets forth in ¶(1)(b) that a motion for sanctions “shall not be filed with or presented to the court, unless 21 days after service of the motion or any other period as the court may prescribe, the challenged action or tactic is not withdrawn or appropriately corrected.”
After receiving additional briefing, the court reached the same conclusion as before.
Miller’s revamped opinion says:
“The current version of subdivision (f), which requires an order under subdivision (a) is not compatible with subdivision (c). If one obtains an order under subdivision (a), then the safe harbor provision of subdivision (f) is rendered meaningless because it will be impossible to withdraw a motion or pleading that has already been found to be frivolous or not under subdivisions (a) and (c).
“The plain language of section 128.5 creates an impossible procedure when the statute is read as a whole because there is no means by which a person could comply with the procedures set forth in the statute. One cannot obtain an order under subdivision (a) while still providing a meaningful safe harbor under subdivision (f).
“Civil Code section 3531 provides, ‘The law never requires impossibilities.’ ”
He declared that “the proper procedure for a trial court to follow in regard to a request for attorney’s fees related to a frivolous anti-SLAPP motion is the procedure set forth in subdivisions (a) and (c),” to the exclusion of subd. (f).
The defendants cited §128.5(f)(1)(A) which provides that “[a] motion for sanctions under this section shall be made separately from other motions or requests,” and contended that Changsha’s motion was improperly made within its reply to the opposition. Miller responded that subd. (c) “permits a request for attorney’s fees to be made in ‘responding papers’ and, applying that subdivision and not subd. (f), Changsha’s “request was proper.”
The case is Changsha Metro Group Co. v. Xufeng, 2020 S.O.S. 5304.
In the unpublished May 19 opinion, Miller rejected the defendant’s argument that Changsha had no standing because it is merely an instrument of the Chinese government and that the Republic of China was the actual party in interest. He said:
“…Changsha alleged that Peng had a fiduciary relationship with Changsha, and Peng injured Changsha. Changsha’s allegations reflect it has a real interest in the case in that Changsha has suffered an injury that will allow it to adequately present all the facts and issues….Accordingly, we conclude Changsha has met its burden, at this stage, of establishing standing.”
Peng and Jia noted that their property in China had been confiscated by the government, and maintained that the action for damages here is a means by which the government seeks to acquire their assets in the United States.
“Defendants’ argument demonstrates that China’s State Council may try to take any money that Changsha might receive from a judgment m this case; however, it does not explain why Changsha was insufficiently injured to have standing,” Miller wrote. “In other words, the assertion that Changsha may not be permitted to retain its remedy does not mean Changsha was not injured.”
That case is Changsha Metro Group v. Xueng, E072596.
In each of the cases, Alhambra attorney Thomas Ogden represented Peng and Jia. Jack P. Dicanio, Lance A. Etcheverry, Caroline Van Ness and Julia M. Nahigian of the Palo Alto office of Skadden, Arps, Slate, Meagher & Flom acted for Changsha.
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