Existing law prohibits a person from filing or recording, or directing another to file or record, a lawsuit, lien, or other encumbrance against any person or entity, knowing that it is false, with the intent to harass the person or entity or to influence or hinder the person in discharging their official duties if the person is a public officer or employee. Existing law also provides that a person who files a lawsuit, lien, or other encumbrance against any person or entity in violation of this prohibition is liable for a civil penalty not to exceed $5,000.
This bill would instead provide that a person who files a lawsuit, lien, or other encumbrance against a person or entity in violation of the above-described prohibition is liable for a civil penalty not to exceed $15,000.
The Uniform Commercial Code-Secured Transactions governs security interests in collateral, including personal property and fixtures, as well as certain sales of accounts, contract rights, and chattel paper. That code, among other things, specifies requirements and procedures regarding perfecting a security interest, including the filing of a financing statement with the Secretary of State. Existing law specifies that a financing statement is sufficient if it provides, among other things, the name of the debtor. If it is established that a secured party is not proceeding in accordance with the code, existing law authorizes a court to restrain collection, enforcement, or disposition of collateral on appropriate terms and conditions.
This bill would require the Secretary of State to notify the debtor named in the financing statement within 21 days after the financing statement is filed. The bill would additionally require any court fees incurred by a debtor to be paid at the end of the judicial proceeding, as specified. The bill would also make any party deemed to have violated above-described provision regarding lawsuits, liens, or other encumbrances liable to the debtor for three times all of the court fees paid.

Statutes affected:
AB 501: 7120 CORP
02/10/25 - Introduced: 7120 CORP
03/24/25 - Amended Assembly: 7120 CORP
01/05/26 - Amended Assembly: 9625 COM, 9625 COM