Free Reply to Opposition - District Court of California - California

Case 3:07-cv-02769-JL

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1 Jonathan M. Cohen (SBN: 168207)

j cohen(fwinston.com
2 Robyn T. Callahan (SBN: 225472)

rcallahan(fwinston.com 3 WINSTON & STRAWN LLP
101 California Street
4 San Francisco, CA 94111-5894 Telephone: 415-591-1000

5 Facsimile: 415-591-1400
6 Attorneys for Plaintiff/Counter-Defendant

FRANK NEMIROFSKY
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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA
SAN FRANCISCO DIVISION

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FRANK NEMIROFSKY, ) Case No. 3:07 CV 02769 JL
Plaintiff, ) PLAINTIFF/COUNTER DEFENDANT
)

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) FRANK NEMIROFSKY'S v. ) COUNTER-COMPLAINANTS' SUR-REPLY SUR-

TO

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Virgin Islands corporation, ) COUNTERCLAIM

) OPPOSITION REGARDING MOTION TO SEOK KI KIM; STV ASIA, LTD., a British ) DISMISS ABUSE OF PROCESS

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Defendants. )
Virgin Islands Corporation, )
SEOK KI KIM and STV ASIA, LTD., a British)
) )

)

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FRANK NEMIROFSKY, ))
Counter-Defendant. )
) )
)

v. )

Counter-Complainants, )

)

)

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Plaintiff/Counter-Defendant FRANK NEMIROFSKY hereby submits this Sur-Reply to
Counter-Complainants' Sur-Opposition to the Motion to Dismiss the Abuse of Process Counterclaim
pursuant to FRCP 12(b)(6).
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PLAINTIFF/COUNTER-DEFENDANT FRANK NEMIROFSKY'S SUR-REPLY TO COUNTER-COMPLAINANTS' SUR- OPPOSITION REGARDING MOTION TO DISMISS THE ABUSE OF PROCESS COUNTERCLAIM
Case No. 3:07 CV 02769 JL

Case 3:07-cv-02769-JL

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1 i. INTRODUCTION
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The Court in its Order dated February 21, 2008 requested further briefing on Plaintiffs
Motion to Dismiss Defendants' Counterclaim for Abuse of

Process. Specifically, the Cour asked
three cases: Rusheen v. Cohen, 37 Cal. 4th 1048 (2006);

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the parties to address the applicability of

Brown v. Kennard, 94 Cal.App. 4th 40 (2001); and Profile Structures, Inc. v. Long Beach Bldg.

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Material Co., 181 Cal. App. 3d 437 (1986). In addition, the Court posed two questions: (1) what
non-litigation alternatives to the Abuse of Process claim were available to Defendants to address the
allegedly excessive TPO; and (2) whether Plaintiff waived the affirmative defense of

the litigation

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privilege as provided by FRCP, Rule 8(c) by not specifically including it in Plaintiffs moving
papers.

Counter-Complainants' Sur-Opposition, contrary to the Court's request, is primarily a
regurgitation of

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their arguments under White Lighting Co. v. Wolfon, (which Counter-Complainants

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continue to insist is the controlling case, despite the fact that it did not address the litigation

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privilege) which as explained in detail below, continues to be misplaced. Counter-Complainants
likewise dismiss the fact that all three of

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the cases cited in the Court's Order actually uphold the

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litigation privilege and bar the abuse of process claims by drawing their own conclusions as to the
basis for the Court's holdings in those cases which are not supported by the decisions themselves.

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THERE IS NO WAIVER OF THE LITIGATION PRIVILEGE UNDER FRCP 8(e)
A.

Defenses Related to Failure to State a Claim Cannot Be Waived.

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Whle there are a number of affirmative defenses that can be deemed waived if not raised in
an answer or other responsive pleadings, the failure to state a claim is one of the three defenses
which are preserved even if not raised until triaL. Brown v. Trustees of Boston Univ., 891 F. 2d 337,

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357 (15t Cir. 1989). Weil & Brown, Cal. Practice Guide: Fed. Civ. Proc. Before Trial (The Rutter

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Group 2007) § 9:45. Contrary to personal jurisdiction, venue, summons or service of process
objections, the affrmative defense of failure to state a claim and failure to state a legal defense to a

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claim are not waived if excluded in a Rule 12 motion. FRCP 12(g)(2) and 12(h)(2). Weil & Brown,
Cal. Practice Guide: Fed. Civ. Proc. Before Trial (The Rutter Group 2007) § 9:48.
2 PLAINTIFF/COUNTER-DEFENDANT FRANK NEMIROFSKY'S SUR-REPLY TO COUNTER-COMPLAINANTS' SUR- OPPOSITION REGARDING MOTION TO DISMISS THE ABUSE OF PROCESS COUNTERCLAIM
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B.
Even if

Failure to State a Claim Can Be Raised Sua Sponte By The Court.
the Court were to find that Counter-Defendant waived the litigation privilege defense

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associated with the Motion to Dismiss on the failure to state a claim, which Counter-Defendant

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denies, the Cour has the power to assert certain defenses sua sponte and the failure to state a claim
is among those defenses which the Court can assert on its own. Franklin v. State of Oregon, State
Welf Div., 662 F.2d 1337,1340-1341 (9th Cir. 1981). Likewise, the Court may dismiss a complaint
on its own initiative for failure to state a claim where the inadequacy of the complaint is apparent as

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a matter of law. Ledford v. Sullvan, 105 F.3d 354, 356 (ih Cir. 1997); See also Flora Home Fed'l
Sav. & Loan Ass'n, 685 F.2d 209, 212 (7th Cir. 1982) (the court can challenge the legal sufficiency of

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a complaint sua sponte and enter judgment accordingly as long as all parties have an opportunity to
be heard).

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III. COUNTER-COMPLAINANTS HAD NOTICE OF THE DEFENSE AND IT HAS

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BEEN FULLY BRIEFED
To the extent that the Cour is persuaded that there has been a waiver of

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the litigation

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privilege defense, despite Counter-Defendants arguments and the authority to the contrary, waiver
may be avoided where the Plaintiff or Counter-Complainant receives adequate notice that the

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responding pary intends to raise a particular defense. Camarilo v. McCarthy, 998 F.2d 638,639
(9th Cir. 1993). See also Weil & Brown, Cal. Practice Guide: Fed. Civ. Pro. Before Trial (The Rutter

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Group 2007) § 8 :229. If Plaintiff or Cross-Complainant has not been prejudiced by the omission of
the defense, cours have determined that there is no waiver. Hargett v. Valley Fed'! Sav. Bank, 60
F.3d 754,763 (1 ith Cir. 1995); See also Harris v. Secretary, Us. Dept. of

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Veterans Affairs, 126 F.3d

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339, 344 (DC Cir. 1997) (leave to amend an answer to plead the omitted defense will be freely
granted before the summary judgment stage as long as there is no prejudice to the opposing party). Here, the Motion to Dismiss, including the litigation privilege defense, has been fully briefed

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and Counter-Complainants were not prejudiced by the arguments Counter-Defendant presented in

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his reply brief and at oral argument as to the litigation privilege. In fact, despite being given an

opportunity to directly address the litigation privilege through fuher briefing, Counter3

PLAINTIFF/COUNTER-DEFENDANT FRANK NEMIROFSKY'S SUR-REPLY TO COUNTER-COMPLAINANTS' SUR- OPPOSITION REGARDING MOTION TO DISMISS THE ABUSE OF PROCESS COUNTERCLAIM
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1 Complainants instead reverted back to the White Lighting case, which did not address the litigation

2 privilege.

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THERE CAN BE NO QUESTION THAT THE LITIGATION PRIVILEGE APPLIES
The California Supreme Court established a four-part test to determine whether a publication

or communication falls within the litigation privilege in Silberg v. Anderson, 50 Cal.3d 205, 212
(1990). Therein, the Supreme Cour held the litigation privilege applies to publications or

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communications which: (1) are made in a judicial or quasi-judicial proceeding; (2) by litigants or
other paricipants authorized by law; (3) to achieve the objects of

the litigation; and (4) that have

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some connection or logical relation to the action. Id.
The Brown Court expressly discussed Silberg noting that California courts have extended the

litigation privilege to "numerous other tort actions", including abuse of process. Brown v. Kennard
94 Cal.AppAth 40, 45. In fact, the Brown Court recognized that "(b)ecause the privilege applies

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without regard to malice or evil motives, it has been characterized as "absolute."" Id. at 45, citing
Silberg v. Anderson, supra, 50 Cal.3d at 215.
There is no question that the actions which form the basis of Counter-Complainants' abuse of
process claim - Counter-Defendants!Plaintiffs filing of

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requests for temporary protective orders and
judicial proceeding to achieve the objects of

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the extension thereof - were made in a

the litigation (in

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this case, to secure the settlement proceeds until such time as the underlying dispute could be resolved) and that said actions were logically connected to the action.
Counter-Complainants continue to reiterate their reliance on White Lighting, emphasizing

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that it stands for the general proposition that abuse of process claims must be sustained when arising
from allegations involving excessive attachment. Yet, White Lighting is clearly distinguishable from

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Rusheen, Brown, Profile Structures and the case at bar. First, and most importantly, White Lighting

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does not address the litigation privilege - which is a defense to the abuse of process claim as upheld

by Rusheen, Brown, and Profile Structures. In addition, in permitting the cross-complainant therein
to maintain his abuse of process claim, the White Lighting court recognized that the assets that crossdefendants attempted to attach bore no relation the cross-defendants claims. White Lighting v.
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1 Wolfon, 68 Cal. 2d 336, 347 (1968). The White Lighting attachment included, among other things,
2 the cross-complainants personal car when the subject of

the dispute between the employee and his

3 former employer had nothing to do with the vehicle, nor was the car related in any capacity to the
4 subject of

the underlying dispute. Id. Here, Counter-Defendant only sought to secure the settlement

5 proceeds which are at the core of the dispute between the parties.
6 Finally, the California Supreme Court did not establish the four-prong test as to the
7 applicability of the litigation until 1990 when it decided Silberg v. Anderson, supra, 50 Ca1.d at 205

8 which is likely the reason that the litigation privilege was not expressly discussed or analyzed in the
9 1968 White Lighting decision.

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COUNTER-COMPLAINANTS' SUR-OPPOSITION FOCUSES ON THE

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MULTIPLICITY OF LITIGATION RATHER THAN THE APPLICABILITY OF

THE LITIGATION PRIVILEGE
A. Counter-Complainants Misconstrue the Court's Holdings In Rusheen and

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Brown.
Counter-Complainants attempt to distinguish Rusheen and Brown by arguing the abuse of

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process claims arose from enforcement or attachment after judgment in those cases. However, the
timing of the attachment or actions giving rise to the abuse of

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process claims is immaterial and

Counter-Complainants' theory in this regard is not supported by the case law. In fact, in O'Keefe v.

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Kampa, 84 Cal. App. 4th 130 (2000), the court specifically stated:

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(T)hat these actions occurred after trial (rather than before or during trial, as in the vast majority of section 47 cases) is not meaningfuL. Numerous cases apply the privilege to pre-trial conduct, some even going so far as to apply it to precomplaint activities. (See e.g. Aronson v. Kinsella (1997) 58 Cal.App.4th 254,

261-268, 68 Cal.Rptr.2d 305; Wilton v. Mountain Wood Homeowners

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Association, Inc., supra, 18 Cal.AppAth at p. 570,22 Cal.Rptr.2d 471.) We see no meaningful distinction that might warant treating defendants' post-trial collection activities differently. O'Keefe v. Kampa, supra, 84 Cal.AppAth at 134-135.
Counter-Complainants also contend that the litigation privilege does not apply because the

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public policy behind the privilege is based upon the goal of avoiding derivative litigation, or
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PLAINTIFF/COUNTER-DEFENDANT FRANK NEMIROFSKY'S SUR-REPLY TO COUNTER-COMPLAINANTS' SUR- OPPOSITION REGARDING MOTION TO DISMISS THE ABUSE OF PROCESS COUNTERCLAIM
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"litigation about litigation". They argue that here, the abuse of process claim is being asserted within
the same case, rather than subsequently in a later filed action and that because the public policy of
the litigation privilege was created to addressed multiplicity of actions, the litigation privilege is

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barred as a defense within the same action. This reasoning is flawed and Counter-Complainants have not cited a single case that supports their anecdotal interpretation. More importantly, their
position is contrary to the February 25, 2008 California First Appellate District holding in 1100 Park

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Lane Associates v. Feldman, -- Cal.Rptr.3d --, 2008 WL 485135 (Cal.App. 1 Dist.). Therein, the
Appellate Court held that the trial court erred in denying Park Lane's motion to strike the cross-

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complaint, finding that the litigation privilege was a proper defense and effectively barred all causes
of action except negligent misrepresentation.

VI. COUNTER-COMPLAINANTS' NON-LITIGATION AL TERNA TIVES
Among the items the Court asked the parties to address in its February 21,2008 Order was
the question of

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what non-litigation options were available. While Counter-Complainants' filed an ex

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parte motion to vacate or modify the temporary protective order which was not scheduled for
hearing or otherwise addressed by the Court until the issue was moot (the initial TPOs expired on June 26, 2007), Counter-Complainants were not prejudiced by this delay since the funds were

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released. More importantly, Counter-Defendant Mr. Nemirofsky likewise filed an ex parte motion
to extend the temporary protective orders until such time as the Court could address the underlying
dispute but said motion was also not heard by the Cour. However, in the case of

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Mr. Nemirofsky's

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ex parte motion, Counter-Defendant Mr. Nemirofsky was prejudiced by the delay because it resulted
in all of

the settlement proceeds being released to STV Asia and Mr. Kim, despite the fact that

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Counter-Complainants have admitted that Counter-Defendant is owed a portion of said settlement.
Yet, to date, Mr. Nemirofsky has stil not seen a dime of

the settlement proceeds and as soon as the

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initial TPO expired, Counter-Complainants took all of the settlement proceeds and ran - which was

exactly the reason Counter-Defendant requested the TPO to begin with (paricularly given that
Defendants are a foreign corporation and a foreign citizen).

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VII. IT is WITHIN THE COURT'S DISCRETION TO CONSIDER ARGUMENTS
RAISED DURING THE REPLY OR AT HEARING.
While it is within the Court's authority to choose not to consider Counter-Defendant's
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arguments with respect to the litigation privilege as Counter-Complainants point out, there are an equal number of cases wherein facts or arguments introduced at the reply stage (or even at oral
arguments) were considered by the court. See e.g. Glenn K. Jackson Inc. v. Roe, 273 F.3d 1192 (9th

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Cir. 2001); EI Pallo Loco, Inc. v. Hashim, 316 F.3d 1032 (9th Cir. 2003); Daghlian v. DeVry

University, Inc., 461 F.Supp. 2d 1121, 1143-1145 (Cal. C.D. 2006).

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The underlying purose for presenting all arguments in a pary's moving papers is to avoid
any prejudice which may occur if the responding party is not afforded an opportunity to address
those arguments in a responding brief. Here, there can be no prejudice to Counter-Complainants
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because pursuant to the Court's February 21,2008 Order, they were given twenty days to prepare
and submit a brief on the litigation privilege issue. Thus, if

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the Cour declines to consider Counter-

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Defendant's litigation privilege claim, the only prejudice that wil result wil be that endured by Mr.
Nemirofsky. The Court's refusal to allow Counter-Defendant's litigation privilege defense as to the
Abuse of Process Counterclaim is an unduly harsh outcome. Further, if

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the Court fails to consider

the litigation privilege on this technicality it would not be in the interest of

judicial economy. To the

extent that the litigation privilege is excluded and the Motion to Dismiss is denied, the same issue
can and wil be raised by way of a Rule 56 or 1 2( c) motion.

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VIII. CONCLUSION
Counter-Complainants' abuse of process claim is bared by the litigation privilege. Their
repeated and erroneous reliance on White Lighting is simply a red-herring - much like the abuse of

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process claim itself. Not only do Counter-Complainants lack damages from the TPOs (an essential
element to their abuse of process claim), they wholly ignore the fact that immediately upon the
expiration of

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the TPOs (and before Plaintiffs ex parte motion to extend the TPOs could be heard by
the settlement proceeds to their personal account

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the cour), Counter-Complainants transferred all of

overseas. This, despite the fact that Mr. Kim has admitted that, at minimum, Plaintiff is owed 15%
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PLAINTIFF/COUNTER-DEFENDANT FRANK NEMIROFSKY'S SUR-REPLY TO COUNTER-COMPLAINANTS' SUR- OPPOSITION REGARDING MOTION TO DISMISS THE ABUSE OF PROCESS COUNTERCLAIM
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the amount which was being held in trust. Ironically, Counter-Complainants are using the legal

2 process to attempt to harass Plaintiff simply by fiing the abuse of process counterclaim.

3 The abuse of process claim is a nothing more than a distraction to what is truly at issue in this
4 case. As set forth fully herein, there can be no question that the complained of activities of Counter-

5 Defendant falls within the litigation privilege and therefore, Counter-Complainants have failed to

6 state a claim. The Cour has both the authority and the obligation to dismiss the abuse of process
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Dated: March 26, 2008

claim under FRCP 1 2(b)( 6).

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WINSTON & STRAWN LLP

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By: Isl
SF:202191.

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Jonathan M. Cohen Robyn T. Callahan Attorneys for Plaintiff FRANK NEMIROFSKY

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PLAINTIFF/COUNTER-DEFENDANT FRANK NEMIROFSKY'S SUR-REPLY TO COUNTER-COMPLAINANTS' SUR- OPPOSITION REGARDING MOTION TO DISMISS THE ABUSE OF PROCESS COUNTERCLAIM
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