Case Number: 22STCV05934    Hearing Date: February 14, 2023    Dept: 40

MOVING PARTIES:           Cross-Defendants Lesley F. Testan and Testan Corporate Center, LLC.

OPPOSITION:                      Cross-Complainants Testan Law, a Professional Corporation, Susan Novell, and Patricia Beyer.

REPLY:                                 Cross-Defendants Lesley F. Testan and Testan Corporate Center, LLC.

This is a business tort action.  On February 16, 2022, plaintiffs Lesley F. Testan (in her individual capacity, and in her capacity as (1) the personal representative of the Estate of Steven Testan, (2) a transferee of a membership interest in Testan Corporate Center and (3) the Trustee of the S. and L. Testan Family Living Trust) (“Testan”) and Testan Corporate Center, LLC (“TCC”), filed this action against defendants Susan Novell (“Novell”), Patricia Beyer (“Beyer”), and Testan Law.  On November 16, 2022, Testan and TCC filed their Third Amended Complaint (“TAC”), asserting causes of action for (1) breach of fiduciary duty, (2) judicial dissolution, and (3) declaratory relief.

On September 30, 2022, Novell, Beyer, and Testan Law filed their operative First Amended Cross-Complaint (“FACC”), against Testan, TCC, the Estate of Steven Carl Testan, Michael James Owen (an individual dba “Michael J. Owen, CPA and Owen & Associates CPAS”), and Juan Antonio Estevez.

The FACC asserts causes of action for (1) breach of contract (TCC lease), (2) breach of contract (TCC operative agreement), (3) breach of fiduciary duty, (4) breach of fiduciary duty (financial statements), (5) aiding and abetting breach of fiduciary duty, (6) tortious interference with contract, (7) aiding and abetting tortious interference with contract, (8) misrepresentation, (9) concealment, (10) constructive fraud, (11) theft, (12) receipt of stolen property, (13) preparation of materially-false financial statements and entries, (14) unjust enrichment, (15) declaratory relief, and (16) injunctive relief.  

Testan and TCC (hereinafter, “Cross-Defendants”) now move to strike the FACC’s (a) first cause of action for breach of contract, (b) second cause of action for breach of contract, (c) sixth cause of action for tortious interference with contract, (d) seventh cause of action for aiding and abetting tortious interference with contract, and (e) sixteenth cause of action for injunctive relief, pursuant to Code of Civil Procedure section 425.16 (anti-SLAPP statute).

The Motion was filed on October 26, 2022.  On December 21, 2022, Novell, Beyer, and Testan Law (hereinafter, “Cross-Complainants”) filed their opposition.  On December 28, 2022, Cross-Defendants filed their reply.  

Tentative Ruling 

After review, the Court GRANTS (in part) and DENIES (in part) the Motion.

The Motion is GRANTED as to the first cause of action for breach of contract, second cause of action for breach of contract, sixth cause of action for tortious interference with contract, and seventh cause of action for aiding and abetting tortious interference with contract in the First Amended Cross-Complaint, because Cross-Defendants met their initial burden of showing those claims arise from protected activity and the Cross-Complainants failed to meet their burden of showing their probability of prevailing on the merits on those claims.  

The Motion is DENIED as to the sixteenth cause of action for injunctive relief in the First Amended Cross-Complaint, because Cross-Defendants have failed to meet their initial burden of showing that claim arises from protected activity.

Background

I.                   Allegations in the TAC 

Plaintiff TCC is a California limited liability company that owns and operates a one-story office building with approximately 21,744 square feet of rentable space, located at 31330 Oak Crest Drive, Westlake Village, California 91361 (the “Building”).  (TAC, ¶¶ 1, 2.)

“From December 2013 through May 2021, founding member, Steven Testan [“Steven”], served as the Manager of TCC, with a 62% membership interest.  In April 2021, [Steven] and his surviving wife, Plaintiff [Testan], executed an LLC Membership Assignment (‘Assignment’), which assigned his 62% membership interest in TCC to himself and Plaintiff, as Trustees of the [S. and L. Testan Family Living Trust (“Trust” or “Living Trust”)].  A true and correct copy of the Assignment is attached [to the TAC] as Exhibit C.”  (TAC, ¶ 2.)  

“On May 8, 2021, [Steven] passed away, and [Testan] became the sole Trustee of the Trust (and thus, [Testan], as the Trustee of the Trust, continues to hold a 62% membership interest in TCC).”  (TAC, ¶ 2.)  

“As soon as [Steven] passed away, Defendant Novell unilaterally anointed herself as the Manager of TCC, even though the Agreement neither designates her as the successor Manager nor provides her with the right or authority to unilaterally select the successor Manager.”  (TAC, ¶ 2.)  Novell only holds a mere 1% membership interest in TCC.  (TAC, ¶¶ 1, 2.)  On the other hand, “the Agreement provides that the Manager of TCC is [Steven] or his successor (in this case, Plaintiff [Testan], as the Trustee of the Trust and duly appointed personal representative of the Estate of Steven Testan).”  (TAC, ¶ 2.)

“As the purported Manager of TCC, Defendant Novell refuses to (a) recognize [Testan’s] rights as the Trustee of the Trust/successor-in-interest to [Steven], (b) cede management of TCC to the proper Manager, (c) provide [Testan] with full and complete rights and access to TCC’s bank accounts (containing the rent deposits and security deposits), or (d) provide [Testan] with rent rolls, leases, and all other documents and information concerning the Building.”  (TAC, ¶ 3.)  “As a result, [Testan] — who, in her capacity as the Trustee of the Trust, owns 62% of TCC (and thus, the Building) — has little to no visibility concerning the operations of the Building.”  (TAC, ¶ 3.)

“In addition, upon information and belief, Defendant Novell recently instructed Defendant Beyer — who, like Defendant Novell, holds only a 1% membership interest in TCC — to fraudulently sign an undated, purported Addendum (purportedly on behalf of TCC), which purported to extend the lease between TCC and tenant, Testan Law, through December 31, 2023.”  (TAC, ¶ 4.)

“Upon information and belief, the lease between TCC and Testan Law expired in July 2019, and Defendant Novell coordinated the preparation and execution of the purported Addendum after [Steven] passed away in order to conceal from Plaintiff that the lease had expired years ago (thereby allowing Testan Law — of which Defendant Novell is Senior Partner/President — to continue to receive the benefit of below market rent, to the detriment of TCC and Plaintiff’s interest as a 62% owner).”  (TAC, ¶ 4.)

“[T]he fact that Defendant Novell — who owns 1% of TCC — seeks to unilaterally manage TCC to the detriment and exclusion of Plaintiff — who owns 62% of TCC — demonstrates that it is not reasonably practicable for TCC to continue to operate.”  (TAC, ¶ 4.) 

II.                Allegations in the FACC

“In 2013, Steven and other senior attorneys of Testan Law formed [Plaintiff TCC], a manager-managed limited liability company … to acquire the [Building], which became and continues to function as the headquarters and Westlake Village office of Testan Law.”  (FACC, ¶ 27.)

“Unbeknownst to Testan Law shareholders Beyer and Novell, to assist with the purchase of the real estate, Testan Law advanced monies in the amount of $900,000 to pay for the shares of Steven, Nominal Defendant Kathleen Brundo (‘ND Brundo’), and Nominal Defendant Lilly Shyu (‘ND Shyu’) for the down payment for the TCC property.  Steven made periodic payments on the money advanced, but presently has a balance of $225,452 remaining unpaid and owed in full. ND Brundo also made periodic payments, but also presently has a balance of $80,123.26 remaining unpaid and owed in full.”  (FACC, ¶ 30.)   

“Immediately upon securing TCC’s mortgage loan on December 19, 2013, TCC entered into a 25-year master lease with Testan Law for the entire premises of the TCC building, which is set to expire on January 1, 2039.  The lease was executed by Steven in his capacities as both President of Testan Law as well as separately as Manager of TCC. Pursuant to the lease, Testan Law was to pay a monthly rent that almost precisely matched the monthly mortgage payments on the TCC building.”   (FACC, ¶ 32.)

“Testan Law holds a master lease over the entire TCC premises as well as an implied contractual right to manage the TCC building and premises, a right which arose from the long-term course of dealing between the Firm and TCC.”   (FACC, ¶ 32.)

 Although Testan Law is the lessee of the entire TCC premises, Steven—purportedly in his two capacities as President of Testan Law and the Manager of TCC—subleased the portions not used by Testan Law.  (FACC, ¶¶ 34, 35.)  “As lessee of the entire TCC premises, Testan Law was legally entitled to all rents and other revenues arising from the rental of the property by its tenants.”  (FACC,  ¶¶ 34, 39.)  “Since Testan Law’s monthly rent for Suite 100 was approximately the amount of the mortgage payment for the TCC building and premises, the rents and revenues from these other tenants should have inured solely to Testan Law and its benefit.  However, Steven directed the rents and revenues from the other tenants to be paid to or collected by TCC in a blatant attempt to secure his real estate investment to Testan Law’s detriment.”  (FACC, ¶¶ 40, 41.) 

 At the time of Steven’s death on or about May 8, 2021, Steven was still acting manager of TCC, and the members of TCC had not unanimously consented to a successor manager as required by the terms of the Operating Agreement.  (FACC, ¶¶ 54, 55.)  

 “Upon information and belief, prior to Steven’s death, Steven transferred his TCC Membership Interest to the Living Trust, of which he and Lesley were sole co-trustees.”  (FACC, ¶ 71.) 

 However, “[a]s all of TCC’s members [had] not agreed to the transfer of Steven’s Membership Interest to [Testan], such transfer is null and void, and [Testan] would have no rights whatsoever relating to TCC.  Because of this, the transfer to the Living Trust rendered it, at most, a Permitted Transferee and not a substitute Member.”  (FACC, ¶¶ 86, 87.) 

 “On or about June 3, 2021, [Testan] (through counsel) announced that she intended to sell

the TCC building or, if she was unable to obtain the unanimous consent of TCC’s members required to sell the building, would propose to wind up and dissolve TCC and sell its assets.”  (FACC, ¶ 57.) 

 “However, neither [TCC’s] Operating Agreement nor California law allow [Testan]—who would be at most a transferee of Steven’s Membership Interest—to participate in TCC’s management or exercise voting or other rights of the duly-admitted members of TCC.”  (FACC, ¶¶ 58, 59.) 

 “Notwithstanding the fact that she has no legal authority to act on behalf of TCC, Lesley has continued her mission to unlawfully sell the TCC building or to completely dissolve the entity ….”   (FACC, ¶ 91.)  Those efforts include “[c]ommencing this Action in a derivative capacity on behalf of TCC.”  (FACC, ¶ 91(i).) 

Judicial Notice

On December 21, 2022, Cross-Complainants filed a request for judicial notice of various court records in this case.  The unopposed request for judicial notice is GRANTED as to all Exhibits (1-6).  (Evid. Code § 452, subd. (d) [providing that a court may take judicial notice of court records].)

  Evidentiary Objections

 No evidentiary objections have been filed.

  Motion

 The anti-SLAPP statute (Code Civ. Proc., § 425.16) is “a mechanism through which complaints that arise from the exercise of free speech rights can be evaluated at an early stage of the litigation process and resolved expeditiously.”  (Simmons v. Allstate Ins. Co. (2001) 92 Cal.App.4th 1068, 1073 [internal quotations omitted].) 

 Courts use a two-step process for determining whether an action is a strategic lawsuit against public participation, or a SLAPP.  First, the court determines whether the defendant has established that the challenged claim arises from protected speech.  (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67.)  If such a showing has been made, the court “determines whether the plaintiff has demonstrated a probability of prevailing on the claim.”  (Ibid.)

                     I.            Prong One: Protected Activity

 “[T]he only thing the defendant needs to establish to invoke the protection of the SLAPP statute is that the challenged lawsuit arose from an act on the part of the defendant in furtherance of her right of petition or free speech.”  (Fox Searchlight Pictures, Inc. v. Paladino (2001) 89 Cal.App.4th 294, 307; see also Code Civ. Proc., § 425.16, subd. (e).)

 In determining whether a cause of action arises from protected conduct, the court focuses on “the allegedly wrongful and injury-producing conduct that provides the foundation for the claims.”  (Castleman v. Sagaser (2013) 216 Cal.App.4th 481, 490-491.)  “[T]he critical consideration is whether the cause of action is based on the defendant’s protected free speech or petitioning activity.”  (Navellier v. Sletten (2002) 29 Cal.4th 82, 89 [emphasis in original].)  In making this determination, the court considers “the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based.”  (Ibid.)

 Here, Cross-Defendants only challenge parts of the causes of action at issue in the FACC, not the entire causes of action.  The crux of their motion is that the first, second, sixth, seventh, and sixteenth causes of action in the FACC arise from protected activity because the pleading (1) alleges that Testan unlawfully interfered with Testan Law’s management of the TCC by “[c]ommencing this Action in a derivative capacity on behalf of TCC,” and (2) incorporates by reference that allegation into other causes of action.  (Motion, pp. 7:16-10:2, citing Cross-Complaint, ¶ 91(i).)

 In opposition, Cross-Complainants argue that Cross-Defendants have not met their initial burden for this motion because they ignore the fact that the causes of action challenged rest on nine acts or set of facts alleged in Paragraph 91, but only focus on the single allegation in Paragraph 91(i).  (Opposition, p. 10:19-27.)  In other words, they argue, by completely failing to (1) discuss in their moving papers any of the acts alleged in Paragraphs 91(a) through 91 (h) and (2) ask the Court to strike any of those allegations, “Defendants tacitly admit that the acts alleged in [those paragraphs] do not constitute protected activity under the anti-SLAPP statute.”  (Opposition, p. 12:4-7.)  

 Cross-Complainants also argue: “Cross-Defendants’ Notice of Motion fails to ask this Court to strike Paragraph 91.i.  Rather the Notice of Motion merely asks the Court to strike the Five Causes of Action.  [Citation.]  Moreover, nowhere in the Memo do Cross-Defendants ask the Court to strike Paragraph 91.i.  For this reason alone, this Court may not properly strike Paragraph 91.i.”  (Opposition, p. 14:15-18.) 

 Cross-Complainants argue that the California Supreme Court case, Bonni v. St. Joseph Health System (2021) 11 Cal.5th 995 (“Bonni”) supports their position. 

 “An anti-SLAPP motion need not be directed at a cause of action in its entirety, but ‘may be used to attack parts of a count as pleaded.’  [Citation.]”  (Symmonds v. Mahoney (2019) 31 Cal.App.5th 1096, 1104.)

 “When relief is sought based on allegations of both protected and unprotected activity, the unprotected activity is disregarded at [the first prong] stage.”  (Baral v. Schnitt (2016) 1 Cal.5th 376, 396.)  “If the court determines that relief is sought based on allegations arising from activity protected by the statute, the second step is reached.  There, the burden shifts to the plaintiff to demonstrate that each challenged claim based on protected activity is legally sufficient and factually substantiated.”  (Ibid.)  “The court, without resolving evidentiary conflicts, must determine whether the plaintiff's showing, if accepted by the trier of fact, would be sufficient to sustain a favorable judgment.”  (Ibid.)  “If not, the claim is stricken. Allegations of protected activity supporting the stricken claim are eliminated from the complaint, unless they also support a distinct claim on which the plaintiff has shown a probability of prevailing.”  (Ibid.)  

 The Supreme Court in Bonni reiterated the rule stated above from Baral, supra, which outlines the procedure to adjudicate an anti-SLAPP motion challenging parts (instead of all) of a cause of action. 

 “Our holding in Baral applies even though the Hospitals sought to strike the entire cause of action, rather than merely parts of it.”  (Bonni, supra, 11 Cal.5th at p. 1011.)  “Baral was a second-step anti-SLAPP case, but our instructions for how to handle so-called mixed causes of action began with the first step.”  (Id. at p. 1010.)  “At that [first] stage, we said, the moving defendant must identify the acts alleged in the complaint that it asserts are protected and what claims for relief are predicated on them.  In turn, a court should examine whether those acts are protected and supply the basis for any claims.  It does not matter that other unprotected acts may also have been alleged within what has been labeled a single cause of action; these are ‘disregarded at this stage.’  [Citation.]”  (Ibid.)  “So long as a ‘court determines that relief is sought based on allegations arising from activity protected by the statute, the second step is reached’ with respect to these claims.”  (Ibid.) 

 The Supreme Court rejected the appellant’s argument in Bonni that when a “motion [is] aimed at the entire cause of action, we should consider whether the gravamen of the entire cause of action was based on protected or unprotected activity.”  (Bonni, supra, 11 Cal.5th at p. 1011.)  “The attempt to reduce a multifaceted cause of action into a singular ‘essence,’” the Supreme Court explained, “would predictably yield overinclusive and underinclusive results that would impair significant legislative policies.”   (Ibid.)  “Striking a cause of action that rests in part on unprotected activity constrains a plaintiff’s ability to seek relief without advancing the anti-SLAPP’ goals of shielding protected activity, which would have been fully served by striking from the complaint only the allegations of protected activity.”  (Ibid.)  “Conversely, refusing to strike any part of a cause of action that rests in part on protected activity defeats the legislative goal of protecting defendants from meritless claims based on such conduct.”  (Ibid.)

 However, the Supreme Court clarified, “we do not suggest that every court that has continued to label its approach a gravamen test even after Baral has erred.”  (Bonni, supra, 11 Cal.5th at p. 1012.)  “Some courts have invoked the term not in the way Bonni suggests — to determine the essence or gist of a so-called mixed cause of action — but instead to determine whether particular acts alleged within the cause of action supply the elements of a claim [citation] or instead are incidental background [citations].”  (Ibid.)  “This approach is consistent with Baral, which reaffirmed that ‘[a]ssertions that are “merely incidental” or “collateral” are not subject to section 425.16.  [Citations.]  Allegations of protected activity that merely provide context, without supporting a claim for recovery, cannot be stricken under the anti-SLAPP statute.’  [Citation.]”  (Ibid.)

 Therefore, in light of Bonni and Baral, the issue here is whether FACC alleges a protected activity that supplies the basis of (or is merely incidental or collateral to) the challenged causes of action.

 Here, the FACC alleges that Testan “has continued her mission to unlawfully sell the TCC building or to completely dissolve the entity …” (FACC, ¶ 91), and that those efforts include “[c]ommencing this Action in a derivative capacity on behalf of TCC.”  (FACC, ¶ 91(i).) 

 “The filing of a lawsuit is an exercise of the First Amendment right to petition the government.”  (Bonni v. St. Joseph Health System (2021) 11 Cal.5th 995, 1024.)  “Consequently, claims that arise out of the filing of a suit arise from protected activity for purposes of the anti-SLAPP statute.”  (Ibid.) 

 The first, second, sixth, and seventh causes of action not only re-allege and incorporate by reference Paragraph 91(i), but also allege that they are based on the “wrongful conduct detailed herein [i.e., the FACC],” or some variation of that language.  (FACC, ¶¶ 94, 96, 106, 116, 145, 146 155, 157, 232.)  In addition, Cross-Complainants admit that the acts alleged in Paragraph 91 supply the basis of the challenge claims, the Court finds that Cross-Defendants have met their burden with regards to the first, second, sixth, and seventh causes of action.   (FACC, ¶¶ 94, 96, 106, 116, 145, 146 155, 157, 232; Opposition, p. 2:21-24.) 

 Accordingly, the Court finds that the Cross-Defendants have met their burden under prong one with regards to the first, second, sixth, and seventh causes of action.  Therefore, the burden will shift to the Cross-Complainants to show the probability of prevailing on those claims.

 On the other hand, the sixteenth cause of action for injunctive relief does not allege that it is based on the wrongdoing Testan committed.  The fact that the claim incorporated or realleged Paragraph 91(i), without more, does not mean that it arises from protected activity.  In any event, “[i]njunctive relief is a remedy, not a cause of action.’  [Citation.]”  (Guessous v. Chrome Hearts, LLC (2009) 179 Cal.App.4th 1177, 1187.)

 Accordingly, the Court finds that the Cross-Defendants have not met their burden under the first prong, with regards to the sixteenth cause of action for injunctive relief.

                 II.            Prong Two: Probability of Prevailing

 To establish the likelihood of prevailing, a “plaintiff must demonstrate that the complaint is both legally sufficient and supported by a sufficient prima facie showing of facts to sustain a favorable judgment if the evidence submitted by the plaintiff is credited.”  (Premier Med. Mgmt. Sys., Inc. v. California Ins. Guarantee Assn. (2006) 136 Cal.App.4th 464, 476 [internal quotations omitted].)

In making prong two’s determination, “the court shall consider the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based.”  (Code Civ. Proc., § 425.16, subd. (b)(2).)  “The court does not, however, weigh [defendant’s] evidence against the plaintiff’s, in terms of either credibility or persuasiveness.  Rather, the defendant’s evidence is considered with a view toward whether it defeats the plaintiff’s showing as a matter of law, such as by establishing a defense or the absence of a necessary element.”  (1-800 Contacts, Inc. v. Steinberg (2003) 107 Cal.App.4th 568, 585.)

 Here, Cross-Complainants have not advanced any argument showing their probability of prevailing on the merits.

 Accordingly, the Court finds it proper to grant the motion.

 
Conclusion 

Cross-Defendants Lesley F. Testan and Testan Corporate Center, LLC’s Special Motion to Strike is GRANTED and DENIED in part.

The Motion is GRANTED as to the first cause of action for breach of contract, second cause of action for breach of contract, sixth cause of action for tortious interference with contract, and seventh cause of action for aiding and abetting tortious interference with contract in the First Amended Cross-Complaint, because Cross-Defendants met their initial burden of showing those claims arise from protected activity and the Cross-Complainants failed to meet their burden of showing their probability of prevailing on the merits on those claims.  

The Motion is DENIED as to the sixteenth cause of action for injunctive relief in the First Amended Cross-Complaint, because Cross-Defendants have failed to meet their initial burden of showing that claim arises from protected activity and because the request for injunctive relief is not a cause of action.