California Court Discusses Anti-SLAPP Law in the Context of Bankruptcy Claims

Bankruptcy actions generally offer people relief from significant financial burdens, as most debts are discharged in bankruptcy. There are exceptions to the general discharge rule, however. For example, claims arising out of willful misconduct, such as fraud or intentional injury, will often be deemed non-dischargeable. Recently, a California court analyzed a debtor’s counterclaims to a creditor’s action to deem debts nondischargeable, in a case in which it was disputed whether California’s Anti-SLAPP law applied in bankruptcy matters. If you need help dealing with overwhelming debts, it is smart to confer with a California bankruptcy lawyer about your options.

Procedural History of the Case

It is alleged that the debtor filed a petition for Chapter 13 bankruptcy in February 2021; it was later converted into Chapter 7 petition. The creditor subsequently filed a complaint against the debtor in June 2021, asking the court to determine the creditor’s claims were nondischargeable because they arose out of the debtor’s willful and malicious conduct. The creditor then amended its complaint on July 1, 2021, to include an objection of discharge on the grounds the debtor made false oaths.

It is reported that, in response, the debtor filed an answer to the amended complaint and a cross-complaint that contained various claims for relief under California law. The creditor then filed a motion to strike the cross-complaint under California’s anti-SLAPP statute. The court granted the creditor’s motion to strike the debtor’s cross-complaint, and the debtor appealed.

Anti-SLAPP Law in the Context of Bankruptcy Claims

On appeal, the court affirmed the lower court’s ruling. In doing so, the court stated that the lower court correctly found that the debtor’s claims were subject to California’s anti-SLAPP statute because said claims explicitly stated that they arose out of California law. Further, the court stated that the lower court accurately explained that there is well-established authority in the Ninth Circuit for the application of California’s anti-SLAPP law in federal court so long as the claims are related state law claims that do not include requests for relief based on federal questions. Thus, the court concluded that the creditor had satisfied its burden of proof that the cross-complaint involved protected activity under California’s anti-SLAPP statute.

Additionally, the Bankruptcy Court found that the debtor had not met his burden of establishing a reasonable probability of success on the merits of his claim because he failed to provide a sufficient legal or factual basis for any of his nine claims. As such, the court affirmed the lower court’s ruling.

Speak to a Capable California Bankruptcy Attorney

Bankruptcy can help many people cope with overwhelming debts, but not all debts are dischargeable via bankruptcy. If you are struggling with substantial debts that you are unable to pay, it is smart to seek guidance from an attorney regarding your options for seeking relief. Matthew D. Roy is a capable California bankruptcy lawyer who can inform you of your legal rights and help you take the steps necessary to regain your financial freedom. You can reach out to Mr. Roy through the form online or by calling (916) 361-6028 to set up a conference.