Filed 3/3/14 Praetorian Ins. Co. v. The Dunnon Law Firm CA5


                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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.




              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                       FIFTH APPELLATE DISTRICT



PRAETORIAN INSURANCE COMPANY,
                                                                                           F066590
         Cross-complainant and Respondent,
                                                                           (Super. Ct. No. 12CECG00482)
         v.
THE DUNNION LAW FIRM et al.,                                                             OPINION
         Cross-defendants and Appellants.

FRESNO COMMUNITY HOSPITAL AND
MEDICAL CENTER,

         Plaintiff,

         v.
PRAETORIAN INSURANCE et al.,

         Defendants.


         APPEAL from an order of the Superior Court of Fresno County. Kristi Culver
Kapetan, Judge.
          The Dunnion Law Firm, Todd D. Reeves; Jeanine G. Strong for Cross-defendants
and Appellants.
         Yee & Belilove, Steven R. Yee, Steve R. Belilove and Austin S. Haigh for Cross-
complainant and Respondent.
                                                        -ooOoo-
       After a personal injury claimant and the insurer for the party allegedly responsible
for the injury settled their dispute by mediation, the insurer was sued for failing to satisfy
the medical lien of one of the injured party’s health care providers. The insurer cross-
complained against the claimant’s attorneys, asserting they falsely represented to the
insurer during the mediation that the medical lien would be paid out of the settlement
proceeds and it was not. The attorneys appeal from the denial of their special motion to
strike (Code Civ. Proc., § 425.16) the first amended cross-complaint, asserting the cross-
complaint was based on protected activity—statements made during prelitigation
settlement negotiations—and cross-complainant failed to demonstrate a probability it
would prevail on the merits of its claims. We agree as to all but one of the causes of
action against the attorneys in the first amended cross-complaint. Accordingly, we
reverse the order.
                     FACTUAL AND PROCEDURAL BACKGROUND
       Genevieve Alvarado, a pedestrian, was allegedly injured when she was hit by a car
driven by Nonette Rhoads. On March 2, 2011, Alvarado, represented by attorney Todd
Reeves and the Dunnion Law Firm (Dunnion), participated in mediation with Praetorian
Insurance Company, Rhoads’ insurer. The parties reached an agreement to settle
Alvarado’s claim. At the end of the mediation, the parties signed a one-page agreement;
it indicated Alvarado would be responsible for all medical and hospital liens. A formal
written agreement was subsequently prepared and executed in April. It provided: “In the
event of the existence of any outstanding liens, it is understood and agreed that
[Alvarado] shall be responsible to satisfy any and all such liens and [Alvarado] shall
indemnify and hold the INSURED and INSURER harmless from any and all claims
made by lienholders, whether such claims have been made, or are in the future made.”
Praetorian paid the settlement funds in a check written to Alvarado and Dunnion.


                                              2
       Fresno Community Hospital (FCH) filed a complaint against Praetorian and
Dunnion, alleging it provided medical treatment to Alvarado after her accident, the cost
of which was approximately $153,000; it gave notice of its medical lien to Praetorian,
Alvarado, and Rhoads, but it was not paid out of the settlement proceeds or otherwise.
FCH alleged one cause of action for enforcement of a hospital lien against Praetorian and
causes of action for constructive trust, unjust enrichment, and money had and received
against Dunnion.
       Praetorian cross-complained against Dunnion, Alvarado, and Reeves, alleging
causes of action for breach of contract, indemnity, declaratory relief, and fraud. The first
amended cross-complaint alleged the settlement agreement contained a provision
requiring Alvarado to be responsible to satisfy all liens; additionally, after the mediation
had concluded, Reeves, on behalf of himself, Dunnion, and Alvarado, represented that
the FCH lien would be paid from the settlement proceeds and he was in the process of
negotiating the lien. Praetorian alleged that, had Reeves’ representations not been made,
it would not have agreed to the settlement. The first amended cross-complaint alleged
that Praetorian issued a check to Alvarado and Dunnion, and the damages sought by FCH
were directly attributable to cross-defendants’ conduct.
       Dunnion and Reeves responded by filing a special motion to strike the first
amended cross-complaint pursuant to Code of Civil Procedure section 425.161 (an anti-
SLAPP2 motion). They asserted the claims made against them in the first amended
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. Dunnion and Reeves also attempted to

1       All further statutory references are to the Code of Civil Procedure unless otherwise
indicated.
2       SLAPP is an acronym for “strategic lawsuit against public participation.” (Equilon
Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 57.)
                                                3
demonstrate there was no probability Praetorian would prevail on its causes of action.
Praetorian opposed the motion, citing California Back Specialists Medical Group v. Rand
(2008) 160 Cal.App.4th 1032 (CBSMG), a case it asserted established that failure of an
attorney to pay a medical lien out of settlement proceeds did not constitute protected
petitioning activity. Relying on that case and others, the trial court denied the anti-
SLAPP motion and imposed sanctions against Dunnion and Reeves for filing a frivolous
motion. Dunnion and Reeves appeal.
                                        DISCUSSION
I.     Standard of Review
       An order granting or denying a special motion to strike is expressly made
appealable by section 425.16, subdivision (i). “Review of an order granting or denying a
motion to strike under section 425.16 is de novo. [Citation.] We consider ‘the pleadings,
and supporting and opposing affidavits … upon which the liability or defense is based.’
[Citation.] However, we neither ‘weigh credibility [nor] compare the weight of the
evidence. Rather, [we] accept as true the evidence favorable to the plaintiff [citation] and
evaluate the defendant’s evidence only to determine if it has defeated that submitted by
the plaintiff as a matter of law.’ [Citation.]” (Soukup v. Law Offices of Herbert Hafif
(2006) 39 Cal.4th 260, 269, fn. 3.)
II.    The Anti-SLAPP Statute
       “A special motion to strike is a procedural remedy to dispose of lawsuits brought
to chill the valid exercise of a party’s constitutional right of petition or free speech.
[Citation.] The purpose of the anti-SLAPP statute is to encourage participation in matters
of public significance and prevent meritless litigation designed to chill the exercise of
First Amendment rights. [Citation.] The Legislature has declared that the statute must be
‘construed broadly’ to that end. [Citation.] [¶] A cause of action is subject to a special
motion to strike if the defendant shows that the cause of action arises from an act in

                                               4
furtherance of the defendant’s constitutional right of petition or free speech in connection
with a public issue and the plaintiff fails to demonstrate a probability of prevailing on the
claim. [Citations.]” (Digerati Holdings, LLC v. Young Money Entertainment, LLC
(2011) 194 Cal.App.4th 873, 882-883 (Digerati).)
       The term “‘act in furtherance of a person’s right of petition or free speech … in
connection with a public issue’” is defined to include: “(1) any written or oral statement
or writing made before a legislative, executive, or judicial proceeding, or any other
official proceeding authorized by law; (2) any written or oral statement or writing made
in connection with an issue under consideration or review by a legislative, executive, or
judicial body, or any other official proceeding authorized by law; (3) any written or oral
statement or writing made in a place open to the public or a public forum in connection
with an issue of public interest; or (4) any other conduct in furtherance of the exercise of
the constitutional right of petition or the constitutional right of free speech in connection
with a public issue or an issue of public interest.” (§ 425.16, subd. (e).) If the person’s
activity falls within section 425.16, subdivision (e)(1) or (2), no separate showing that the
statement was made “in connection with a public issue” is required. (Digerati, supra,
194 Cal.App.4th at p. 883.)
III.   Anti-SLAPP Motion
       Consideration of an anti-SLAPP motion requires a two-step process. “First, the
court decides whether the defendant3 has made a threshold showing that the challenged
cause of action is one arising from protected activity. The moving defendant’s burden is
to demonstrate that the act or acts of which the plaintiff complains were taken ‘in
furtherance of the [defendant]’s right of petition or free speech.’” (Equilon Enterprises v.
Consumer Cause, Inc., supra, 29 Cal.4th at p. 67.) If the moving defendant meets this


3       Section 425.16 applies to cross-complainants and cross-defendants the same as to
plaintiffs and defendants. (§ 425.16, subd. (h).)
                                               5
burden, the court must determine whether the plaintiff has shown a probability of
prevailing on the claim. (Ibid.) “Only a cause of action that satisfies both prongs of the
anti-SLAPP statute—i.e., that arises from protected speech or petitioning and lacks even
minimal merit—is a SLAPP, subject to being stricken under the statute.” (Navellier v.
Sletten (2002) 29 Cal.4th 82, 89 (Navellier).)
       A.     Arising from protected activity
       A defendant meets its burden of showing that the challenged cause of action arises
from protected activity “‘by demonstrating that the act underlying the plaintiff’s cause
fits one of the categories spelled out in section 425.16, subdivision (e)’ [citation].”
(Navellier, supra, 29 Cal.4th at p. 88.) In this context, “arises from” means “based
upon.” (Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th 1106, 1114.)
“[T]he mere fact that an action was filed after protected activity took place does not mean
the action arose from that activity for the purposes of the anti-SLAPP statute. [Citation.]
Moreover, that a cause of action arguably may have been ‘triggered’ by protected activity
does not entail that it is one arising from such. [Citation.] In the anti-SLAPP context, the
critical consideration is whether the cause of action is based on the defendant’s protected
free speech or petitioning activity. (Navellier, supra, 29 Cal.4th at p. 89.)
       The gravamen or principal thrust of the action determines whether the challenged
cause of action arises from protected activity. (Renewable Resources Coalition, Inc. v.
Pebble Mines Corp. (2013) 218 Cal.App.4th 384, 387, 396 (Renewable Resources).) The
gravamen is the acts on which liability is based; it is “‘the allegedly wrongful and injury-
producing conduct that provides the foundation for the claims.’” (Id. at p. 396, italics
omitted.) “‘In deciding whether the “arising from” requirement is met, a court considers
“the pleadings, and supporting and opposing affidavits stating the facts upon which the
liability or defense is based.” [Citation.]’ [Citation.]” (Seltzer v. Barnes (2010) 182
Cal.App.4th 953, 962.) The “focus is not the form of the plaintiff’s cause of action but,

                                              6
rather, the defendant’s activity that gives rise to his or her asserted liability—and whether
that activity constitutes protected speech or petitioning.” (Navellier, supra, 29 Cal.4th at
p. 92.) The anti-SLAPP statute does not apply where protected activity is only collateral
or incidental to the transaction or occurrence underlying the complaint. (Wang v. Wal-
Mart Real Estate Business Trust (2007) 153 Cal.App.4th 790, 794.)
              1.      Breach of contract
       The first cause of action of Praetorian’s first amended cross-complaint alleges
breach of a written settlement contract against Alvarado, Dunnion, and Reeves. The
general allegations state that Rhoads, Praetorian, and Alvarado entered into the
agreement, and the settlement agreement, attached as an exhibit to the first amended
cross-complaint, identifies Rhoads, Praetorian, and Alvarado as the parties to the
agreement. Nonetheless, the first cause of action is alleged against all cross-defendants,
and states that “cross-defendants” executed the agreement and agreed to satisfy any and
all liens relating to Alvarado’s injuries from the incident. It alleges cross-defendants
breached the contract by failing to comply with all laws and rules of conduct in
performing their contractual duties, failing to satisfy the FCH lien, and failing to agree to
indemnify Praetorian and hold it harmless from the claims of FCH. Thus, the first cause
of action is based on an alleged failure to perform obligations under a contract. It is not
based on any protected speech or petitioning activity.
       In Applied Business Software, Inc. v. Pacific Mortgage Exchange, Inc. (2008) 164
Cal.App.4th 1108 (Applied), the plaintiff had sued the defendant in federal court for
breach of contract and copyright infringement involving the use of the plaintiff’s
software. The parties mediated the dispute and entered into a settlement. (Id. at p. 1111.)
Under the settlement agreement, the defendant was required to make certain payments to
the plaintiff, cease using the plaintiff’s software, and return all copies to the plaintiff with
certification that it had done so and had deleted all copies from its computers. (Id. at

                                               7
p. 1112.) When the defendant failed to provide a proper certification, the plaintiff filed
an action against the defendant alleging breach of the settlement contract and seeking
injunctive relief and damages. The defendant filed an anti-SLAPP motion, asserting the
action was brought in retaliation for the defendant filing a declaration in another federal
action on behalf of a company the plaintiff had sued. (Applied, at p. 1114.) The
defendant contended the action arose out of its protected activity of submitting a
declaration in the federal action.
       The court disagreed.

       “Defendant’s acts on which plaintiff’s complaint is based are defendant’s
       alleged failure to provide the certification called for in the settlement
       agreement, and defendant’s alleged use of plaintiff’s software after the time
       set out in the settlement agreement for ceasing use of it. Neither of those
       alleged actions by defendant can reasonably be said to have been taken by
       defendant in furtherance of its right of petition or free speech in connection
       with a public issue. Therefore, it cannot reasonably be said that plaintiff’s
       complaint arises from/is based on protected activities undertaken by
       defendant.… The filing of that declaration is not what this case is based on.
       This is a breach of contract suit based solely on defendant’s alleged failure
       to comply with specific provisions in the settlement agreement.” (Applied,
       supra, 164 Cal.App.4th at p. 1117.)
       The court rejected the defendant’s contention that, because settlement agreements
are writings made in judicial proceedings or in connection with issues under
consideration in judicial proceedings, and therefore are the product of acts taken in
furtherance of the party’s right of petition, a suit brought by one of the parties against the
other to enforce the agreement is necessarily based on the defendant’s protected activity.
(Applied, supra, 164 Cal.App.4th at p. 1117.)

       “Here, the gist of plaintiff’s complaint is not that defendant did something
       wrong by acts committed during the course of the underlying federal action,
       but rather that defendant did something wrong by breaching the settlement
       agreement after the underlying action had been concluded. Under the
       explanatory provisions in subdivision (e) of section 425.16, defendant’s
       entering into the settlement agreement during the pendency of the federal
                                              8
       case was indeed a protected activity, but defendant’s subsequent alleged
       breach of the settlement agreement after the federal case was concluded is
       not protected activity because it cannot be said that the alleged breaching
       activity was undertaken by defendant in furtherance of defendant’s right of
       petition or free speech, as those rights are defined in section 425.16. Thus,
       the instant suit is based on alleged conduct of defendant that is not
       protected activity.” (Applied, supra, 164 Cal.App.4th at p. 1118.)
       Similarly, Praetorian’s breach of contract cause of action alleges Dunnion and
Reeves breached the settlement agreement by failing to ensure payment of the FCH lien
was made out of the proceeds of the settlement check. The gravamen of this cause of
action is not that Dunnion or Reeves did something wrong in the course of the mediation
or the settlement of Alvarado’s claim, but that they subsequently failed to perform as
agreed in the settlement contract. Thus, “it cannot be said that the alleged breaching
activity was undertaken by [Dunnion or Reeves] in furtherance of [their] right of petition
or free speech.” (Applied, supra, 164 Cal.App.4th at p. 1118.) The trial court did not err
in concluding this cause of action is not subject to section 425.16.
               2.     Fraud
       The ninth through eleventh causes of action of Praetorian’s first amended cross-
complaint alleged fraud against Dunnion and Reeves.4 They allege that, after the March
2, 2011, mediation concluded, Reeves represented to Praetorian that the FCH lien would
be paid from the settlement proceeds and that he was negotiating the lien. Praetorian
alleges Reeves and Dunnion knew of the FCH lien at that time, but “knew the [FCH] lien
would not be paid from settlement proceeds, and that Dunnion and Reeves was [sic] in
fact not in the process of ‘negotiating’ said lien” or “had no intention of satisfying that
the [FCH] lien.” Praetorian alleges Reeves and Dunnion, by making the
misrepresentation, intended to and did induce it to enter into the settlement agreement;
Praetorian justifiably relied on the representation and was damaged when FCH sued it

4      The headings identify them as causes of action for fraud, intentional misrepresentation,
and negligent misrepresentation, respectively.
                                                9
and it was required to defend itself. Essentially, Praetorian alleges Reeves and Dunnion
committed fraud by making a promise without an intention of performing it. (Civ. Code,
§§ 1572, subd. (4), 1710, subd. (4).)
       The gravamen or principal thrust of these causes of action—“‘the allegedly
wrongful and injury-producing conduct that provides the foundation for the claims’”
(Renewable Resources, supra, 218 Cal.App.4th 396, italics omitted)— is the alleged false
promise that Dunnion would pay the FCH lien out of the proceeds of Alvarado’s
settlement with Praetorian, when it had no intention of doing so. This allegedly resulted
in the harm to Praetorian: it executed the settlement agreement, tendered payment to
Alvarado and Dunnion, and was sued by FCH when the lien was not paid.
       “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.]’ [Citations.]” (Digerati, supra, 194 Cal.App.4th at pp. 886-887.) “[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].’
[Citations.]” (Digerati, supra, at p. 887.)
       Alvarado and her attorney, Reeves, met with Rhoads’ attorney and representatives
of her insurer, Praetorian, to mediate Alvarado’s personal injury claim against Rhoads,

                                              10
for damages arising out of an automobile-pedestrian accident. Although there is no
evidence Alvarado or Reeves expressly threatened to sue Rhoads if Alvarado’s claim was
not settled, we would be hard pressed to interpret the mediation as anything other than an
attempt to settle Alvarado’s claim in order to avoid litigation that would have been filed
if the matter had not settled.5
       The alleged statements on which Praetorian’s fraud causes of action are based
concerned the subject of the dispute; they related to expenses incurred by Alvarado as a
result of the injuries for which Rhoads was allegedly responsible, and the liens claimed
by FCH to secure payment. Although the statements were allegedly made after the
parties had reached their initial agreement to settle, the statements concerned that
settlement, Praetorian asserts 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 against Dunnion and
Reeves 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, we find that the statements that
form the basis of Praetorian’s fraud causes of action against Reeves and Dunnion fall
within the protection of section 425.16. Reeves and Dunnion made the required
threshold showing that the fraud causes of action arose from protected activity.
       The trial court relied on CBSMG in ruling that Praetorian’s claims, including its
fraud claims, were not based on protected activity, and therefore should not be stricken
pursuant to section 425.16. In CBSMG, Rand, an attorney, represented the injured parties
in personal injury actions. (CBSMG, supra, 160 Cal.App.4th at p. 1035.) The plaintiffs
had provided medical treatment to Rand’s clients pursuant to liens on those actions.

5       The fact that Alvarado’s claim was settled for almost $500,000 suggests her injuries were
serious, her claim was substantial enough she would not have simply abandoned it if the
mediation had been unsuccessful, and Praetorian understood this.
                                               11
When the actions were resolved, Rand disbursed the proceeds without satisfying the
plaintiffs’ liens. The plaintiffs sued Rand for payment, alleging causes of action for
breach of contract, breach of fiduciary duty, conversion, money had and received, and
unjust enrichment. (Ibid.) The basis of the plaintiffs’ claims was its allegation that Rand
had signed the liens and was thereby bound to honor them. The liens stated that Rand, as
attorney for the patients, agreed to the terms stated in the liens, agreed to withhold “such
sum” from any settlement or judgment, and warranted that there was a fiduciary
relationship between him and the lienholders regarding payment of the liens from any
settlement or judgment. The liens bore a signature above Rand’s name, but he denied
signing them. (Ibid.) Rand filed an anti-SLAPP motion, which the trial court denied on
the ground the plaintiffs’ complaint did not arise from a protected activity. (CBSMG, at
pp. 1035-1036.)
       The court stated:

              “CBSMG’s complaint is based on the underlying controversy
       between private parties about the validity and satisfaction of the liens.
       These issues were never under consideration in any court or official
       proceedings until CBSMG filed the current action.

              “Appellant contends his conduct with respect to the liens was
       protected activity because he disbursed the funds as an attorney and was
       representing his clients in the underlying actions. Not all attorney conduct
       in connection with litigation, or in the course of representing clients, is
       protected by section 425.16. [Citations.] The trial court correctly
       determined that CBSMG’s claims did not arise from any act in furtherance
       of appellant’s right to petition or his right to free speech.” (CBSMG, supra,
       160 Cal.App.4th at p. 1037.)
       CBSMG is distinguishable from Praetorian’s first amended cross-complaint for
fraud against Dunnion and Reeves. In CBSMG, the lienholders sued Rand on an
agreement he allegedly signed obligating him to pay the lienholders out of any settlement
or judgment in the clients’ actions. Rand’s anti-SLAPP motion was aimed at the
lienholders’ action against him for breach of duties arising out of that agreement.
                                            12
Apparently, the agreement was not an issue in the personal injury actions between Rand’s
clients and those responsible for their injuries. The basis of the lienholders’ action was
the agreement between Rand and the lienholders, which was a business transaction
between those parties, made at a time when no litigation between them was
contemplated.
       The anti-SLAPP motion filed by Dunnion and Reeves did not challenge the claims
of the lienholder, FCH; FCH did not allege any contract between it and Dunnion or
Reeves obligating them to satisfy the FCH lien out of the proceeds of settlement.
       The anti-SLAPP motion filed by Dunnion and Reeves challenged Praetorian’s first
amended cross-complaint. The fraud causes of action in that cross-complaint were based
on alleged promises made by Dunnion and Reeves in the course of mediation between the
personal injury claimant and the insurer of the party allegedly responsible for the
claimant’s injuries. Praetorian itself asserts the parties discussed the FCH lien and its
payment during the parties’ settlement discussion. Praetorian’s fraud claims arose
directly out of statements allegedly made by Reeves during the negotiation of a
settlement between the parties to potential litigation. Thus, unlike the motion in CBSMG,
the anti-SLAPP motion here did not address a business transaction separate from the
personal injury litigation or claim.
       Contrary to the conclusion of the trial court, CBSMG is not dispositive of the
outcome of the motion of Dunnion and Reeves. The allegations of misrepresentations or
false promises made during the course of settlement are central to Praetorian’s fraud
causes of action, not merely incidental or collateral. We conclude Dunnion and Reeves
made a threshold showing that the fraud claims arose out of protected activity and are
subject to section 425.16. Thus, the first prong of the test under section 425.16 was
satisfied.


                                             13
              3.     Indemnity and declaratory relief
       The third, fourth, and fifth causes of action of Praetorian’s first amended cross-
complaint allege causes of action for implied indemnity, total equitable indemnity, and
declaratory relief. The indemnity causes of action vaguely allege that the injuries FCH
alleged in its complaint were proximately caused by the negligent, reckless, or intentional
acts of Dunnion and Reeves. The declaratory relief cause of action seeks a declaration of
the rights of Praetorian to indemnity or comparative contribution from Dunnion and
Reeves. The only wrongful conduct alleged against Dunnion and Reeves as the basis for
any such right to indemnity or contribution is the alleged making of false promises that
Reeves and Dunnion would satisfy the FCH lien out of the proceeds of Alvarado’s
settlement. Dunnion and Reeves made the required threshold showing that these causes
of action, like the fraud causes of action, are based on protected communications made
during the prelitigation settlement of Alvarado’s claims against Rhoads. Accordingly,
the first prong of the anti-SLAPP test was satisfied as to these causes of action also.
       B.     Probability of prevailing
       Once the court determines that the defendant has made a threshold showing that
the challenged cause of action is one arising from protected activity, it must then
determine whether the plaintiff has demonstrated a probability of prevailing on that cause
of action. (HMS Capital, Inc. v. Lawyers Title Co. (2004) 118 Cal.App.4th 204, 211.)
The burden is on the plaintiff to show such a probability. (Ibid.) “[I]n order to establish
the requisite probability of prevailing [citation], the plaintiff need only have ‘“stated and
substantiated a legally sufficient claim.”’ [Citations.] ‘Put another way, the plaintiff
“must demonstrate that the complaint is both legally sufficient and supported by a
sufficient prima facie showing of facts to sustain a favorable judgment if the evidence
submitted by the plaintiff is credited.”’ [Citations.]” (Navellier, supra, 29 Cal.4th at
pp. 88-89.)

                                              14
       “‘Promissory fraud’ is a subspecies of the action for fraud and deceit. A promise
to do something necessarily implies the intention to perform; hence, where a promise is
made without such intention, there is an implied misrepresentation of fact that may be
actionable fraud. [Citations.]” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.)
The elements of promissory fraud are: “‘(1) a promise made regarding a material fact
without any intention of performing it; (2) the existence of the intent not to perform at the
time the promise was made; (3) intent to deceive or induce the promisee to enter into a
transaction; (4) reasonable reliance by the promisee; (5) nonperformance by the party
making the promise; and (6) resulting damage to the promise[e].’ [Citation.]” (Rossberg
v. Bank of America, N.A. (2013) 219 Cal.App.4th 1481, 1498.)
              1.      Negligent misrepresentation
       Praetorian has not alleged a viable claim of negligent misrepresentation. The
elements of a cause of action for negligent misrepresentation include a misrepresentation
of a past or existing fact, without reasonable grounds for believing it to be true. (Thrifty
Payless, Inc. v. The Americana at Brand, LLC (2013) 218 Cal.App.4th 1230, 1239.)
Praetorian’s eleventh cause of action does not allege this. It alleges Reeves represented
the FCH lien would be paid from the settlement proceeds, but he and Dunnion had no
intent of satisfying that lien. It does not allege a misrepresentation of existing fact, but a
promise to perform an act in the future.
       “To maintain an action for deceit based on a false promise, one must specifically
allege and prove, among other things, that the promisor did not intend to perform at the
time he or she made the promise and that it was intended to deceive or induce the
promisee to do or not do a particular thing. [Citations.] Given this requirement, an
action based on a false promise is simply a type of intentional misrepresentation, i.e.,
actual fraud. The specific intent requirement also precludes pleading a false promise
claim as a negligent misrepresentation, i.e., ‘The assertion, as a fact, of that which is not

                                              15
true, by one who has no reasonable ground for believing it to be true.’ [Citation.] Simply
put, making a promise with an honest but unreasonable intent to perform is wholly
different from making one with no intent to perform and, therefore, does not constitute a
false promise. Moreover, we decline to establish a new type of actionable deceit: the
negligent false promise.” (Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2
Cal.App.4th 153, 159, fn. omitted.)
       Praetorian’s eleventh cause of action fails to allege an actionable negligent
misrepresentation; a cause of action for negligent false promise is not legally cognizable.
Consequently, Praetorian has not shown a probability of prevailing on this cause of
action, because it has not stated or substantiated a legally sufficient claim.
               2.      Fraud and intentional misrepresentation
       The substance of the allegations of the ninth and tenth causes of action for fraud
and intentional misrepresentation is the same.6 They allege Reeves, on behalf of himself,
Dunnion, and Alvarado, represented to Praetorian and others that the FCH lien would be
paid out of the proceeds of Alvarado’s settlement and Reeves was in the process of
negotiating the lien. Praetorian alleges Reeves and Dunnion had knowledge of the lien,
knew and intended that it would not be paid, and made the representation to induce
Praetorian to enter into the settlement agreement.
       Dunnion and Reeves assert Praetorian cannot prevail on its causes of action
against them 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


6      The tenth cause of action also incorporates by reference all the allegations of the ninth
cause of action.
                                                16
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 litigation privilege furthers several policies: it “afford[s] litigants and
witnesses [citation] the utmost freedom of access to the courts without fear of being
harassed subsequently by derivative tort actions.” (Silberg v. Anderson (1990) 50 Cal.3d
205, 213.) “The privilege also promotes complete and truthful testimony, encourages
zealous advocacy, gives finality to judgments, and avoids unending litigation.
[Citation.]” (Budwin v. American Psychological Assn. (1994) 24 Cal App.4th 875, 880.)
The privilege originally applied only to defamation actions, but has since been extended
to any communication and all torts other than malicious prosecution, including fraud7 and
negligent misrepresentation. (Budwin, at p. 880.)
       The litigation privilege has also 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.)
“Settlements of disputes have long been favored by the courts and attorneys should be
accorded wide latitude in making statements during settlement negotiations. [Citations.]
Protecting attorneys during the course of the representation of their clients is necessary to
7       The litigation privilege applies to a legal action for damages for fraud. It does not apply
to an equitable action to set aside a settlement agreement for extrinsic fraud. (Home Ins., supra,
96 Cal.App.4th at p. 26; Navarro v. IHOP Properties, Inc. (2005) 134 Cal.App.4th 834, 844.)
Praetorian’s cross-complaint, however, does not contain a cause of action seeking to set aside the
settlement agreement based on extrinsic fraud.
                                                17
promote the litigants securing free access to the courts. [Citation.]” (Asia Investment Co.
v. Borowski (1982) 133 Cal.App.3d 832, 843.)
       The parties mediated Alvarado’s claim against Rhoads under circumstances
indicating litigation was “‘actually contemplated in good faith and under serious
consideration.’” (Haneline, supra, 167 Cal.App.4th at p. 319.) Praetorian alleges
Dunnion and Reeves made promises in the course of that mediation on which Praetorian
relied in settling. Those alleged promises related to the subject of the anticipated
litigation; they concerned Alvarado’s payment of liens that were part of the damages
incurred by her and placed in issue by her personal injury claim against Rhoads.
Accordingly, Praetorian has not demonstrated a probability of prevailing under the anti-
SLAPP statute, because the statements fell within the protection of the litigation
privilege. The trial court erred in denying the special motion to strike the ninth and tenth
causes of action of Praetorian’s first amended cross-complaint.
              3.     Indemnity and declaratory relief
       Like the fraud causes of action, the causes of action for indemnity and declaratory
relief are based on allegations that Dunnion and Reeves made false promises on which
Praetorian relied in entering into the settlement of Alvarado’s claim against Rhoads. The
alleged false promises were made during the mediation, carried out in anticipation of
litigation, and are therefore protected by the litigation privilege. Praetorian has not
demonstrated a probability of prevailing on these causes of action, and the trial court
erred in denying the special motion to strike the third, fourth, and fifth causes of action of
the first amended cross-complaint.
IV.    Sanctions
       Pursuant to sections 425.16 and 128.5, the trial court imposed sanctions of
$2,410.45 against Dunnion and Reeves for bringing a frivolous motion to strike. Section
425.16, subdivision (c)(1), authorizes the trial court to award costs and attorney fees to a

                                             18
prevailing plaintiff, pursuant to section 128.5, if the trial court finds the motion to strike
“is frivolous or is solely intended to cause unnecessary delay.” “Frivolous” is defined by
section 128.5 to mean “(A) totally and completely without merit or (B) for the sole
purpose of harassing an opposing party.” (§ 128.5, subd. (b)(2).) In light of our
conclusion the special motion to strike had merit and should have been granted as to all
but one of the first amended cross-complaint’s causes of action against Dunnion and
Reeves, we conclude the motion was not frivolous and sanctions should not have been
imposed.
                                       DISPOSITION
       The order denying the special motion to strike Praetorian’s first amended cross-
complaint and imposing sanctions against Dunnion and Reeves for filing a frivolous
motion is reversed, with directions to the trial court to enter a new and different order
granting the motion as to the third, fourth, fifth, ninth, tenth, and eleventh causes of
action, and denying it as to the first cause of action. We also remand the matter to the
trial court for a ruling on the request, made by Dunnion and Reeves in their motion to
strike, for an award of attorney fees and costs. The parties will bear their own costs on
appeal.



                                                                   _____________________
                                                                               HILL, P. J.
WE CONCUR:


 _____________________
GOMES, J.


 _____________________
PEÑA, J.

                                              19
