Litigation Privilege Saves the Day for Mechanic's Liens

In RGC Gaslamp v. Ehmcke Sheet Metal Co., the Fourth Appellate District held that a trial court properly granted an anti-SLAPP motion because the recording of a mechanic's lien is protected by the litigation privilege.

In RGC Gaslamp, subcontractor Ehmcke Sheet Metal Company ("Ehmcke") recorded a mechanic's lien to recoup payment due for sheet metal fabrication and installation done at a luxury hotel project in downtown San Diego. Project owner RGC Gaslamp, LLC ("RGC") recorded a release bond for the lien. Thereafter, Ehmcke recorded three successive mechanic's liens identical to the first, prompting RGC to sue it for quiet title, slander of title, and declaratory and injunctive relief. After retaining California counsel, Ehmcke then released its liens and advised it did not intend to record any more. Ehmcke then filed a special motion to strike under the anti-SLAPP statute (Code Civ. Proc. § 425.16.) which was granted.

In considering Ehmcke's motion to strike, the trial court found Ehmcke met its moving burden because the recording of even an invalid lien is protected petitioning activity. Thereafter, RGC failed to make a prima facie showing that its sole remaining cause of action for slander of title could withstand application of the litigation privilege. RGC's appeal followed, arguing the duplicative filing of mechanic's lien after recording of a release bond is not a protected activity.

After extensively reviewing the mechanic's lien statutory scheme and the anti-SLAPP motions two-prong process, the Court of Appeal affirmed.

First, the Court of Appeal examined and determined that RGC's claims arose from a protected activity. In doing so, the Court of Appeal determined recording a mechanic's lien, including an invalid or unlawful mechanic's lien, is protected by the litigation privilege (Civil Code §47(b)) because the act of recording a mechanic's lien is a prerequisite to a foreclosure action and the anti-SLAPP.

The Court of Appeal argued that A.F. Brown Electrical Contractor, Inc. v. Rhino Electric Supply, Inc. (2006) 137 Cal.App.4th 1118, which held serving a stop notice was only protected under the anti-SLAPP statute if done when a lawsuit related to that act was contemplated in good faith and given serious consideration, was wrongly decided because the A.F. Brown court improperly applied the anti-SLAPP analysis by requiring good faith and serious consideration when the California Supreme Court had made clear that a plaintiff is only required to make a prima facie showing of protected activity in the first prong.

Second, the Court of Appeal determined RGC could not establish slander of title because there was no reasonable expectation any further liens would be recorded. The Court of Appeal held the recording of an invalid mechanic's lien was absolutely privileged because recording a mechanic's lien is a communication made as part of a judicial proceeding. Ehmcke filed and recorded its liens while improperly advised regarding California's mechanic's liens statutes and then withdrew the liens after retaining California counsel.

RGC Gaslamp is important for two reasons. First, there is now case law holding that recording a mechanic's lien, even if invalid or unlawful, is protected by the litigation privilege. Second, A.F. Brown, supra, has been questioned and service of a stop payment notice may be protected by the litigation privilege because service of a stop payment notice is a required prerequisite to a stop payment notice action.

Lawrence S. Zucker II is the Managing Partner of Haight Brown & Bonesteel LLP's San Diego office. He is the chair of the Firm's General Liability and Food Safety Practice Groups, is co-chair of the Construction Law Practice Group, and a member of the Product Liability, Real Estate, Transactional and Transportation Law Practice Groups.

Stephen M. Tye is a member of the Construction Law, General Liability, and Product Liability practice groups. He has experience in all phases of litigation, including pre-litigation investigations, initial evaluations, discovery, law and motion, trial preparation, second-chairing trials, and writing appeal briefs. 

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Monday, 24 January 2022

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