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3rd District Court of AppealA few months ago, I wrote about the anti-SLAPP statute as a powerful defensive tool in California trust and estate litigation. Adding new light to the subject is a Sacramento-based appellate court’s decision in Greco v. Greco (2016) 2 Cal.App.5th 810.

The case narrows the ability of fiduciaries to bring motions to dismiss under the anti-SLAPP statute when they are sued for how they have spent trust and/or probate assets.

Before and after Clyde Greco Jr.’s parents died, he used money from their trust and their estates to fund litigation against his sister and others, purportedly to recover money they owed to the trust and estates. His sister, Cara Lyn Greco (a beneficiary), filed two lawsuits against him, claiming that he spent more on the litigation than he could have recovered because the litigation really was a vendetta against family members. Clyde claimed that the lawsuits targeted him for pursuing litigation and thus were “strategic lawsuits against public participation” within the meaning of the anti-SLAPP statute, codified at California Code of Civil Procedure section 425.16. The trial court ruled that the statute was inapplicable, prompting Clyde’s appeal.

Before we go further, why does this matter? When the anti-SLAPP statute applies, a defendant (here Clyde) can force a plaintiff (Cara Lyn) to prove at the very outset of her case that she has sufficient evidence to support her claims. If she can’t present enough evidence, her case will be dismissed and she’ll have to pay her brother’s legal expenses. Defendants who can’t invoke the anti-SLAPP statute don’t have the benefit of this special type of motion to dismiss, can’t immediately put plaintiffs to their proof, and generally won’t be able to recover defense expenses from plaintiffs.

Greco v. Greco is all about when a defendant can fire the anti-SLAPP arrow, a technical subject with an important consequence in California trust and estate disputes as well as civil litigation generally.

Cara Lyn complained that Clyde, before and after their parents died, spent over $1 million chasing claims valued at less than $100,000 against relatives, thereby wasting money from the trust/estates to pursue his personal vendetta.

Justice Elena Duarte, of the Third District Court of Appeal in Sacramento, reasoned that the gravamen of Cara Lyn’s claim was Clyde’s alleged wrongful taking of trust and estate funds, which was not protected activity under the anti-SLAPP statute. The statute focuses on the nature of the plaintiff’s activity, not the motive of the plaintiff who engaged in that activity. Hence, since Clyde’s taking of money in his fiduciary capacity did not constitute protected speech or petitioning, and the intra-family dispute did not involve a public issue or an issue of public interest, the anti-SLAPP statute did not apply.

On the other hand, after parsing through Cara Lyn’s claims against Clyde, the appellate court found one claim that arose from his protected activity. In a cause of action for constructive fraud, she alleged that he breached his fiduciary duty to the beneficiaries by “misrepresenting the facts relating to the Actions and his motivations in bringing and maintaining same.” Since the gravamen here was Clyde’s alleged misrepresentations, not his misuse of trust/estate funds, the anti-SLAPP statute did apply. Clyde’s alleged wrong involved making false statements regarding the substantive issues in the litigation he pursued to people (i.e., beneficiaries) having an interest in it.

Note that the appellate court did not decide whether Cara Lyn had shown a reasonable probability of prevailing on her constructive fraud claim, instead sending it back to the probate court for further consideration under the second prong of the anti-SLAPP analysis. So all of Cara Lyn’s claims, in the short term at least, survived the appellate ruling.

The takeaway is that the anti-SLAPP statute does not protect fiduciaries of trust/probate estates, such as trustee Clyde, when they are faulted for the wrongful expenditure of trust assets even when that expenditure was for the purpose of engaging in petitioning activity (i.e., litigation). On the other hand, if a beneficiary specifically challenges a fiduciary for misrepresenting facts or engaging in other speech/petitioning activity, the fiduciary can turn to the anti-SLAPP statute to try to knock out the claim. It’s a nuanced distinction with a difference.

Fortunately, even if the anti-SLAPP statute is out of reach, trustees generally can use trust funds to defend against claims of breach of trust brought by beneficiaries, subject to review by the probate court, so the trustee retains an advantage in that respect. Also, while dismissal of a frivolous claim may take longer without using the anti-SLAPP statute, a probate court eventually will get there either by granting summary judgment or rejecting the claim after a bench trial.