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February 22, 2005

Wentland v. Wass (2005) 126 Cal. App.4th 1484

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The Third District holds that application of the litigation privilege in a breach of contract context turns on the policies underlying the privilege.

Warren Wass and Walter Reiss brought an action for an accounting in three real estate partnerships managed by Charles Wentland.  In opposition to Wentland’s motion for summary judgment Wass and Reiss submitted a CPA’s declaration that an audit of two unrelated investments, Avenue Investments and Parkview Terrace, revealed evidence of self-dealing by Wentland.

Wentland filed a cross-complaint alleging a prior agreement precluded Wass and Reiss from making accusations or comments of wrongdoing by Wentland concerning the Parkview Terrace partnership.  Wentland alleged that Wass and Reiss breached the agreement by the statements of their attorney and the declaration of the CPA in opposition to the motion for summary judgment.  Wass and Reiss argued that the communications fell within the litigation privilege.  Wentland argued that the litigation privilege does not apply to a cause of action for breach of contract.

The court held that application of the litigation privilege in an action for breach of contract turns on whether it furthers the policies underlying the privilege.  The purposes of the litigation privilege are to ensure free access to the courts, promote complete and truthful testimony, encourage zealous advocacy, give finality to judgments, and avoid unending litigation.

The court held that the litigation privilege should not bar Wentland’s breach of contract case because a party who contracts not to speak waives the protection of the litigation privilege.  Application of the privilege in this context would not serve to promote access to the courts, truthful testimony, or zealous advocacy.  The breach of contract cause of action is not based on wrongful conduct during litigation, but on the breach of a separate promise independent of the litigation.  The breach was not simply a communication, but also wrongful conduct or performance under the contract.  Application of the privilege in this context would frustrate the purpose of the agreement reached in the Parkview Terrace matter.

The litigation privilege in this case would not encourage finality and avoid litigation.  In reaching settlement in the Parkview Terrace matter, the parties presumably came to an acceptable conclusion about the truth of Wass and Reiss’s comments about Wentland’s management of the partnership.  Allowing such comments to be made in litigation, shielded by the privilege, invites further litigation as to their accuracy and undermines the settlement reached in the Parkview Terrace matter.

Comment: The litigation privilege will not protect statements made in litigation that violate the terms of a confidentiality provision of a prior settlement agreement.

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