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Xumei Chen et al v. Katherine K. Sutherland

December 14, 2010

XUMEI CHEN ET AL., PLAINTIFFS AND RESPONDENTS,
v.
KATHERINE K. SUTHERLAND, DEFENDANT AND APPELLANT.



Santa Clara County Super. Ct. No. CV133580

The opinion of the court was delivered by: Bamattre-manoukian, Acting P.J.

Chen v. Sutherland

CA6

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

I. INTRODUCTION

Respondents Xuemei Chen, Cheong Ang, and Richard C. Conroy invested a total of $474,000 in an investment scheme involving the purchase and sale of heavy equipment. When they did not receive the promised return on their investments, respondents discovered that the investment scheme was fraudulent. They filed a lawsuit against appellant Katherine K. Sutherland, M.D. (Katherine)*fn1 and her husband Richard Sutherland (Richard),*fn2 whom they believed had induced them to participate in the fraudulent investment scheme and were therefore responsible for their losses under several contract and tort theories of liability.

Respondents also filed an application for a writ of attachment and a temporary protective order. The trial court issued a temporary protective order that prohibited the Sutherlands from accessing their bank accounts and transferring or encumbering their interest in their home. However, after 40 days the trial court denied the application for a writ of attachment and dissolved the temporary protective order. Katherine then filed a cross-complaint against respondents alleging that they were liable for abuse of process because they had sought to attach assets that far exceeded the value of their claims in order to force her to capitulate.

Respondents brought a special motion to strike the cross-complaint under the anti-SLAPP statute, Code of Civil Procedure section 425.16,*fn3 which provides that a cause of action arising from constitutionally protecting speech or petitioning activity is subject to a special motion to strike unless the cross-complainant establishes a probability of prevailing on the claim. (§425.16, subd. (b)(1).) The trial court granted the motion, finding that the cross-complaint arose from protected activity and the abuse of process claim was barred by the litigation privilege codified at Civil Code section 47, subdivision (b).

On appeal, Katherine argues that the trial court erred because the gravamen of her abuse of process claim is non-communicative activity, and therefore the litigation privilege does not apply. For the reasons stated below, we disagree and therefore we will affirm the order granting respondents' special motion to strike the complaint.

II. FACTUAL AND PROCEDURAL BACKGROUND

A. The Complaint

According to the factual allegations in the complaint filed on January 29, 2009, respondents Xuemei Chen (Chen) and Cheong Ang (Ang) met their neighbors Richard and Katherine Sutherland at a Fourth of July barbecue in 2008. During the barbecue, Richard told Chen that he, his wife Katherine, and his business partner Thomas E. Francis, M.D., were making a lot of money--at least a 2 percent to 4 percent profit per month on their principal--by investing in heavy machinery. Richard offered to explain the investment opportunity further to Chen and Ang if they were interested.

After Chen and Ang expressed an interest, Richard followed up by sending Chen and Ang emails explaining the heavy machinery investment program and by meeting with them in person. Richard informed them that the investment program, which involved the purchase and resale of heavy equipment, was risk free and Richard and his wife had personally invested $500,000. Sometime later, Richard told Chen and Ang that there was an opportunity for them to invest $174,000 and receive a return of 4.25 percent in four weeks by submitting the funds to Dr. Francis. Richard also told them that Dr. Francis worked closely with Windell Spell, the Georgia broker-dealer for the heavy equipment sales.

Chen shared Richard's information about the investment opportunity with a friend, Richard Conroy. Thereafter, in reliance on Richard's representations, Chen and Ang made their first investment by wiring $87,000 to Dr. Francis in July 2008, as did Conroy. A few days later, Richard sent Chen and Ang an email advising them of another investment opportunity that would return a 4.5 percent interest in five weeks. Again relying on Richard's representations, Chen and Ang agreed to make a second investment in the heavy machinery investment program and wired $100,000 to Dr. Francis.

Chen and Ang made a third investment in August 2008 after Richard offered them the opportunity to receive a 10 percent return in four to six weeks on a fraction of a $900,000 investment in which another investor had already invested $500,000. Based on Richard's representations, Chen and Ang wired $200,000 to Dr. Francis. In September 2008, Dr. Francis paid a return of $3,690 to Chen and Ang and a return of $3,690 to Conroy on their first investments. Chen and Ang did not receive any further returns on their investments and subsequent events revealed that heavy machinery investment program was a Ponzi scheme*fn4 and the Georgia broker-dealer was wanted by the FBI.

Based on these allegations, Chen, Ang, and Conroy claim that Richard, Katherine, Dr. Francis, and other defendants are liable for the return their investment funds and other damages under several contract and tort theories of liability.

B. Attachment Proceedings

The same day that they filed their complaint, January 29, 2009, respondents Chen, Ang and Conroy filed an ex parte application for a right to attach order, an order for issuance of a writ of attachment, and a temporary protective order. In their memorandum of points and authorities and the declarations filed in support of the application, respondents asserted that attachment of the Sutherlands' home and bank accounts was necessary to prevent the Sutherlands from transferring or encumbering their real property, emptying their bank accounts, and moving their assets out of the country, in light of their expressed intention of moving to Panama. Respondents also asserted that their claims had probable validity because the Sutherlands had misrepresented themselves as successful investors in the heavy machinery investment program in order to convince respondents to invest in a fraudulent Ponzi scheme.

The trial court issued a temporary protective order on January 29, 2009, that temporarily prohibited the Sutherlands from transferring, either directly or indirectly, their interests in their bank accounts and real property pending a hearing on respondents' application for a writ of attachment.

Richard filed an opposition to the application for a writ of attachment in which he argued that the application should be denied and the temporary protective order dissolved because respondents had not established the probable validity of their claims. In his supporting declaration, Richard stated that he and Katherine had no plans to move to Panama, they were also victims of the Ponzi scheme, and prior to respondents' investments in the scheme he had no knowledge that it was fraudulent. Richard also stated that none of respondents' investment funds had been placed in an account over which he had control. Further, Richard submitted the declaration of a real estate appraiser who gave his opinion that the ...


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