Judge: Daniel S. Murphy, Case: 22STCV18523, Date: 2022-08-24 Tentative Ruling

Case Number: 22STCV18523    Hearing Date: August 24, 2022    Dept: 32

BACKGROUND

            On June 6, 2022, Plaintiff Fraser Ross filed this action against Defendants Jonny Tucker (“Jonny”) and Carolyn Tucker (“Carolyn”), alleging the following eight causes of action: (1) fraud, (2-3) breach of fiduciary duty, (4) accounting, (5) breach of contract, (6) declaratory relief, (7) conversion, and (8) quantum meruit.  

            Plaintiff alleges that Defendants induced him into a joint business venture and promised him 50% ownership interest. Plaintiff and Jonny formed Los Angeles Trading Company, LLC (“LATC”) to operate the new business. Plaintiff contributed financially to the business and also provided his guidance and expertise, which increased LATC’s success. Jonny allegedly mismanaged the company and used LATC assets to pay for his and Carolyn’s personal expenses. When Defendants became dissatisfied with Plaintiff over Plaintiff’s focus on profits, Jonny repudiated Plaintiff’s ownership stake in LATC, claiming that Plaintiff never formally obtained such an interest. The parties never signed a written contract memorializing their oral agreement, though an unsigned draft was exchanged. Afterwards, Jonny held a vote of the LATC membership to dissolve the company without notifying Plaintiff and then petitioned the court to wind up the company.

            On July 25, 2022, Defendants filed the instant Special Motion to Strike (anti-SLAPP) targeting the allegations in the complaint referencing Jonny’s vote to dissolve LATC and petition for winding up. The complaint alleges that Jonny breached his fiduciary duties to Plaintiff and LATC by, inter alia, voting to dissolve LATC. (Compl. ¶¶ 49, 56.) The complaint also alleges that Jonny breached the parties’ agreement by voting to dissolve LATC and petitioning to wind up the company. (Id., ¶¶ 75-76.) The complaint seeks a judicial declaration that the vote to dissolve LATC is null and void. (Id., ¶ 83.)

LEGAL STANDARD

A special motion to strike under Code of Civil Procedure section 425.16 allows a defendant to seek early dismissal of a lawsuit that qualifies as a strategic lawsuit against public participation. A SLAPP is “a cause of action against a person arising from any act of that person in furtherance of the person’s right of petition or free speech under the United States Constitution or the California Constitution in connection.” (Code Civ. Proc., § 425.16, subd. (b)(1).)

Such acts include (1) any written or oral statement or writing made before a judicial proceeding, (2) any written or oral statement or writing made in connection with an issue under consideration or review by a judicial body, (3) any written or oral statement or writing made in a place open to the public or a public forum in connection with an issue of public interest, or (4) any other conduct in furtherance of the exercise of the constitutional right of petition or the constitutional right of free speech in connection with a public issue or an issue of public interest. (Code Civ. Proc., § 425.16, sub. (e).)

Evaluation of an anti-SLAPP motion requires a two-prong process. First, the court decides whether the defendant has made a threshold showing that the challenged cause of action is one arising from protected activity. Second, if the court finds such a showing has been made, the court must then consider whether the plaintiff has demonstrated a probability of prevailing on the claim. (Nygard, Inc. v. Uusi-Kerttula (2008) 159 Cal.App.4th 1027, 1035.) If both prongs are met—(1) the defendant is being sued for protected activity, and (2) the plaintiff has no reasonable probability of success—then the lawsuit is subject to being stricken under the statute. (Dwight R. v. Christy B. (2013) 212 Cal.App.4th 697, 709-10.)

JUDICIAL NOTICE

            Defendants’ request for judicial notice of the petition filed in Case No. 22STCP01458 is granted. (Evid. Code, §§ 452, 453.)

DISCUSSION

I. Protected Activity

            To satisfy the first prong, a moving defendant must identify the activity each challenged claim rests on and demonstrate that that activity is protected by the anti-SLAPP statute. (Wilson v. Cable News Network, Inc. (2019) 7 Cal.5th 871, 884.) A “claim may be struck only if the speech or petitioning activity itself is the wrong complained of, and not just evidence of liability or a step leading to some different act for which liability is asserted.” (Park v. Board of Trustees of California State University (2017) 2 Cal.5th 1057, 1060.) An anti-SLAPP motion is, at its core, a motion to strike, which is capable of targeting specific allegations and not just entire causes of action. (Baral v. Schnitt (2016) 1 Cal.5th 376, 343.) This is because “the same primary right may be violated by both protected and unprotected activity.” (Ibid.) A special motion to strike will be effective against those allegations that target protected activity, even if a cause of action is also based on unprotected activity.

Here, the complaint targets protected activity to the extent that it asserts liability based on Jonny’s vote to dissolve LATC and subsequent petition for winding up. Jonny’s petition to the court is indisputably protected activity. (See Code Civ. Proc., § 425.16(e)(1).) However, Jonny’s vote to dissolve LATC is also protected as an act in furtherance of his right to petition. “The anti-SLAPP protection for petitioning activities applies not only to the filing of lawsuits, but extends to conduct that relates to such litigation, including statements made in connection with or in preparation of litigation.” (Kolar v. Donahue, McIntosh & Hammerton (2006) 145 Cal.App.4th 1532, 1537.)

On April 21, 2022, Jonny petitioned the Los Angeles Superior Court for a decree to wind up LATC pursuant to Corporations Code section 17707.04. (Def.’s RJN, Ex. 1.) Section 17707.04 provides that “[i]n the event of a dissolution of a limited liability company all of the following apply: . . . (b) [u]pon the petition of any manager or of any member . . . a court of competent jurisdiction may enter a decree ordering the winding up of the limited liability company, if that appears necessary for the protection of any parties in interest.” (Corp. Code, § 17707.04.) Thus, Jonny’s vote to dissolve LATC was a prerequisite to his petition for winding up and was sufficiently “made in connection with or in preparation of litigation” to fall under anti-SLAPP protection. (See Kolar, supra, 145 Cal.App.4th at p. 1537.)

Plaintiff argues that Jonny’s vote to dissolve LATC was not in furtherance of his petition to the court because a vote to dissolve and petitioning the court for a dissolution are two mutually exclusive ways to obtain dissolution, and thus one is not a prerequisite of the other. (Opp. 11:28-12:23.) However, Jonny’s petition to the court was for a winding up of the LLC, not dissolution. (See Def.’s RJN, Ex. 1.) Corporations Code section 17707.04 provides that “[i]n the event of a dissolution,” as in, once a dissolution has been effectuated, a member may petition the court for a winding up. Thus, the dissolution, accomplished in this case by Jonny’s vote, was a prerequisite to Jonny’s petition for winding up.

In sum, both the vote to dissolve LATC and the petition for winding up are protected activity. The complaint thus targets protected activity to the extent it asserts liability based on these acts. The burden now shifts to Plaintiff to demonstrate a probability of success.

II. Probability of Success

A plaintiff establishes a probability of prevailing on the claim by showing that the complaint is legally sufficient and supported by a prima facie showing of facts that, if proved at trial, would support a judgment in the plaintiff's favor. (Taus v. Loftus (2007) 40 Cal.4th 683, 713-14.) Rather than weighing the evidence, the court must “accept as true the evidence favorable to the plaintiff . . . The plaintiff need only establish that his or her claim has ‘minimal merit’ to avoid being stricken as a SLAPP . . . .” (Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 291.¿) The defendant’s showing is only analyzed “to determine if it defeats the plaintiff’s claim as a matter of law.” (Area 55, LLC v. Nicholas & Tomasevic (2021) LLP, 61 Cal.App.5th 136, 151.)

            Defendants argue that they are immune from liability stemming from the litigation activities under Civil Code section 47. The Court agrees. Civil Code section 47, subdivision (b) makes privileged any communication made in a judicial proceeding or in the initiation or course of any proceeding authorized by law. The privilege “is not limited to statements made during a trial or other proceedings, but may extend to steps taken prior thereto, or afterwards.” (Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1057.) As discussed above, both the vote for dissolution and petition for winding up were done in furtherance of litigation. Where alleged wrongful conduct is privileged under Section 47, the court may correctly find that the plaintiff has no probability of success. (Id. at p. 1065.)

Plaintiff does not address this argument, thus conceding it. Plaintiff only refers to evidence demonstrating that the elements of breach of contract, breach of fiduciary duty, and declaratory relief have been met. (See Opp. 14:6-22.) However, Civil Code section 47 protects the dissolution vote and subsequent petition as a matter of law, even if the facts would otherwise establish liability. An anti-SLAPP motion is properly granted where a defendant’s showing defeats the plaintiff’s claim as a matter of law. (See Area 55, supra, 61 Cal.App.5th at p. 151.)

In sum, Plaintiff has failed to demonstrate a probability of success in holding Jonny liable based on the dissolution vote or petition for winding up. Accordingly, these allegations must be stricken.

III. Attorneys’ Fees

“[A] prevailing defendant on a special motion to strike shall be entitled to recover his or her attorney’s fees and costs.” (Code Civ. Proc., § 425.16(c).) Defendants request attorneys’ fees as part of their motion. (Mtn. 12:14-20.)

Plaintiff argues that attorneys’ fees are unjustified because even if the motion is granted, Defendants will have achieved an illusory victory that has no practical effect on the litigation. (Opp. 15:6-16.) However, the effect of this motion is not de minimis. Striking the subject allegations means that Plaintiff cannot hold Jonny liable based on his vote to dissolve LATC or his petition to wind up LATC. Although Plaintiff may maintain his causes of action based on other nonprotected acts, it is still significant to remove one basis for liability.

Defense counsel predicts he will spend 25 hours in connection with this motion. (Elder Decl. ¶ 2.) This is unreasonably high given the relative simplicity of the issues involved. Defendants have no response to Plaintiff’s argument that the amount is unsubstantiated. (See Opp. 15:16-18.)   

CONCLUSION

            Defendants’ Special Motion to Strike is GRANTED.