Nguyen v. Proton Technology Corp.

Opinion

I. Introduction

This appeal presents the interesting issue of the extent to which the absolute litigation privilege provided by Civil Code section 47, subdivision (b),^[1] protects statements made in pre-civil-litigation demand letters or telephone calls which reflect discredit on individuals and are substantially

A

ppellant was employed as sales representative of respondent Proton Technology Corporation (Proton) from approximately August 1995 until March 1996. Proton is a Fremont-based manufacturer of printed circuit boards. At least as of December 1995, appellant was employed by Proton through the Santa Clara County Probation Department’s work furlough program. The only communication in the record to Proton from that department does not recite any offense committed by appellant which brought him to that probationary status, but respondents’ appendix includes material establishing that appellant had, in 1995, pled guilty to shooting a gun at an unoccupied vehicle (Pen. Code, § 247, subd. (b)) and vandalism (Pen. Code, § 594, subds. (a) and (b)(2)).

In March 1996, appellant, along with several others, left Proton and became employed by a San Jose-based printed circuit board manufacturer, Excelsior Manufacturing, Inc. (Excelsior). Proton became concerned that Excelsior was improperly soliciting its employees and customers, and consulted its attorneys, respondent Pahl & Gosselin, about filing a lawsuit to stop Excelsior from so doing. Accordingly, respondent Fenn Horton III, a litigation attorney with Pahl & Gosselin, sent a fax letter to Manny Lee, the chief executive officer of Excelsior. Insofar as pertinent to this litigation, the letter read: “This law firm represents Proton Technology Corporation on a continuing basis in matters involving litigation. [¶] This letter is to provide clear warning to you that your company’s recent acts of unfair competition will not be tolerated. Specifically, your employee, Tam Le Ta, has been raiding Proton’s employees to induce them to go to work for Excelsior. Tam began his raiding activities while he was still employed by Proton. The day after Tam began working for your company, approximately 20 of Proton’s production employees left to follow Tam in going to work for your company. In addition, a former Proton sales representative, Vinh Phuc Nguyen,[^[2] ] who recently began working for Excelsior, has been soliciting Proton’s customers to induce them to switch their business to Excelsior. Vinh also began his wrongful solicitations while he was still an employee of Proton. We think you should be aware that Vinh was working for Proton under a work furlough program sponsored by the Santa Clara County Probation Department. Vinh was in prison for repeatedly and violently

This letter had been approved in advance by Proton’s chief executive officer (CEO), Tony Wang. Indeed, it was Wang who advised Horton that appellant’s conviction had been “for beating his wife.”^[4]

On April 2, Excelsior’s attorneys briefly responded to Horton’s letter. This response recited an unfamiliarity with the details alleged by Horton, but generally denied his allegations of wrongdoing and requested that further communications to either Excelsior or any of its current employees be via them.

In early April, Attorney Horton initiated communications with one Joseph Martinez of the Santa Clara County Probation Department, appellant’s probation officer. This tactic had also been suggested to him by Wang. In his declaration in support of respondents’ motion for summary judgment, Horton stated that he informed Martinez that appellant had terminated his work furlough program with Proton and been hired by Excelsior. He also “expressed concern that [appellant] had engaged in tortious business activities on Excelsior’s behalf.” According to Horton’s declaration, Martinez promised to investigate the allegations.^[5]

Also early in April, Horton received a report on appellant’s criminal record. In the process, he learned that he had been mistaken regarding the crimes for which appellant had been convicted. Several weeks later, on April

On July 24, 1996, appellant filed a six-count complaint in Alameda County Superior Court. Included in the complaint were causes of action for libel, slander, invasion of privacy, intentional infliction of emotional distress, and interference with economic relationship. The complaint was directed entirely to the March 29 letter to Excelsior and the telephone conversation or conversations Horton had with appellant’s probation officer, Martinez.^[6] A demurrer was sustained without leave to amend as to the two causes of action for invasion of privacy; it was overruled as to the other four causes of action.

After discovery, respondents filed motions for summary judgment in November 1997. These motions asserted that Horton’s several communications were either absolutely protected by the litigation privilege of section 47(b) or, alternatively, qualifiedly privileged under Civil Code section 47, subdivision (c). The court granted both motions on the basis of the section 47(b) privilege.

Appellant filed a timely notice of appeal.^[7]

Section 47(b) provides that a communication made “[i]n any . . . (2) judicial proceeding” is privileged. This privilege is absolute, not qualified, even when prelitigation communications are implicated. (See Aronson v. Kinsella (1997) 58 Cal.App.4th 254 , 261-268 [ 68 Cal.Rptr.2d 305 ].)

More specifically, both before and after Rubin, several cases have held that prelitigation demand letters of the sort involved here may be privileged under the section. Possibly the earliest of these (and among those cited by the court in Rubin) was Lerette v. Dean Witter Organization, Inc. (1976) 60 Cal.App.3d 573 [ 131 Cal.Rptr. 592 ] (Lerette). Others include: Fuhrman v. California Satellite Systems (1986) 179 Cal.App.3d 408 , 420-421 [ 231 Cal.Rptr. 113 ], disapproved on other grounds in Silberg, supra, 50 Cal.3d at page 219; Financial Corp. of America v. Wilburn (1987) 189 Cal.App.3d 764 , 777 [ 234 Cal.Rptr. 653 ]; Laffer v. Levinson, Miller, Jacobs & Phillips (1995) 34 Cal.App.4th 117 , 122-125 [ 40 Cal.Rptr.2d 233 ]; and Aronson v. Kinsella, supra, 58 Cal.App.4th at pages 261-266.

However, the privilege obviously cannot extend to anything that is written just because it is contained in a prelitigation demand letter, a point which brings us back to the passage in Silberg in which the two tenets regarding the relationship of the statements to the litigation are fused into one. The court’s language, again, was that “the communication be connected with, or have some logical relation to, the action, i.e., that it not be extraneous to the action.” A few lines later, it restated the requirement as being that the statement have some “reasonable relevancy to the subject matter of the action.” (Silberg, supra, 50 Cal.3d at p. 220.)

This was not always the principle applied by our appellate courts. Pre- Silberg, there are several reported cases in which a very loose and general relationship between the statement and the putative litigation was deemed

Whatever the pre-Silberg merits of these expansive views,^[9] we think they are clearly outdated in view of the limitations we have quoted from that case. Additionally, even pre-Silberg, the appellate courts often found superficially litigation-related statements not protected by the privilege. Younger v. Solomon (1974) 38 Cal.App.3d 289 [ 113 Cal.Rptr. 113 ] is perhaps the most interesting such case. It was an action brought by one Kern County attorney against another. The respondent was one of 10 attorneys who had filed ethics charges against the appellant with the State Bar of California. Later, respondent filed a civil action against the appellant on behalf of one of the alleged victims of the latter’s conduct. In the course of that action, the respondent filed extensive interrogatories, including one specifically referencing and incorporating the “ambulance chasing” State Bar charges. The appellant filed a cross-complaint seeking damages, contending that the publication via the interrogatory of the State Bar charges was tortious on several theories. (Id. at pp. 293-294.) The superior court granted summary judgment against the appellant on the basis of section 47(b). The Court of Appeal reversed, holding that “[publication of these matters has no logical relation or connection with Mrs. Jenkins’ action .... The terms ‘related to’ or ‘connected with’ necessarily require more than a remote relationship or common factual genesis between two otherwise unconnected subjects. To come within the privilege, the fact communicated itself must have some bearing on or connection with the subject matter of the litigation.” (38 Cal.App.3d at pp. 301-302.)

Similarly, in Kinnamon v. Staitman & Snyder (1977) 66 Cal.App.3d 893 [ 136 Cal.Rptr. 321 ] (Kinnamon), disapproved on other grounds in Silberg,

This case presents facts eminently befitting that goal. We have no difficulty in holding that the inclusion in Horton’s demand letter to Excelsior of references to appellant’s criminal record falls outside of the section 47(b) privilege. In the first place, Horton’s particularization of appellant’s criminal history was simply incorrect. It was alleged that he had been “in prison for repeatedly and violently assaulting his wife.” It turned out that he was not in prison, but only county jail, and then for convictions for shooting at an unoccupied car and vandalism.

More importantly, we think any “connection” between such a conviction and the civil unfair competition focus of Horton’s demand letter is, to be charitable about it, tenuous. Respondents attempt to “connect” the statements regarding appellant’s criminal record with the dispute by arguing that the former “may have persuaded Excelsior that [appellant] was more than capable of committing unfair business practices since he had been convicted of more serious crimes in the past.” This contention borders on the specious. First, the “unfair business practices” of which Proton and its attorneys complained in their March 29 letter are not “crimes.” Second, one’s proclivity to engage in such practices is in no way, shape or form predictable by whether he (a) beats his wife (b) shoots at unoccupied cars, or (c) commits vandalism.

The only other “connection” respondents offer is equally attenuated: they contend that, “if Proton decided to pursue litigation,” appellant’s convictions would be relevant because, if he became a witness, such would be admissible to impeach him under Evidence Code section 788. Thus, informing Excelsior of this fact in advance might achieve the goal of “avoiding litigation.” First of all, respondents overlook the fact that admission of a prior felony conviction in a civil action is very much subject to the exercise of a court’s discretion under Evidence Code section 352. (See Robbins v. Wong (1994) 27 Cal.App.4th 261 , 274 [ 32 Cal.Rptr.2d 337 ].) Second, it simply stretches credulity to the breaking point to believe that any part of respondents’ motivation for including a reference to appellant’s alleged wife beating was a desire to advise Excelsior that he might be subject to impeachment if used as a witness in a civil unfair competition action.

Two of the pre-Silberg cases discussed above, Kinnamon and Carney, involved civil law disputes in which the challenged communication implicated, in one way or another, criminal law issues. In both, overly aggressive collection attorneys sent demand letters which, in one case threatened to initiate, and in the other misrepresented the existence of, criminal proceedings. In both, the courts denied application of the privilege. We think the broader import of these holdings is that the use of the criminal records of individuals in purely civil disputes such as that between Proton and Excelsior is and should be fraught with peril. That is, surely, why our Rules of Professional Conduct send this warning shot across attorneys’ bows: “A member shall not threaten to present criminal . . . charges to obtain an advantage in a civil dispute.”^[11] (Rules Prof. Conduct, rule 5-100(A).)

For the foregoing reasons, we hold that the prelitigation demand letter’s reference to appellant’s prior criminal history was not privileged under section 47(b).

Which leaves only the other issue raised by the pleadings and ruling below, i.e., whether the telephone communication initiated by Horton with appellant’s parole officer was privileged under the section. Concerning it, appellant’s complaint^[12] alleges that a Proton employee or agent stated to the parole officer that appellant (a) “stole defendant Proton’s trade secret [sic], information, and clients” and (b) “repeatedly and violently assaulted his wife.”

As noted above, the tactic of contacting Martinez was suggested to Horton by Proton’s CEO, Wang, who “wanted me to see if I could persuade Nguyen’s probation officer to tell Nguyen to stop soliciting Proton’s employees and customers. . . .” This suggests rather strongly that Proton was not only ready but eager to use the access it fortuitously had to appellant’s probation officer as leverage in a purely civil dispute with appellant and his new employer.