Judge: H. Jay Ford, III, Case: 24SMCV00316, Date: 2024-09-13 Tentative Ruling

Case Number: 24SMCV00316    Hearing Date: September 13, 2024    Dept: O

  Case Name:  Planet 13 Holdings, Inc. v. El Capitan Advisors, Inc, et al.

SUBJECT:                 SPECIAL MOTION TO STRIKE PURUSANT TO CCP 425.16 (ANTI-SLAPP)

MOVING PARTY:   Defendants Casa Verde Capital, L.P., Casa Verde Capital EF, L.P., and Karan Wadhera

RESP. PARTY:         Plaintiff Planet 13 Holdings, Inc

TENTATIVE RULING

Defendants Casa Verde Capital, L.P., Casa Verde Capital EF, L.P., and Karan Wadhera Special Motion To Strike Pursuant to CCP 425.16 (anti-SLAPP) is DENIED.*   

            Defendants do not meet their burden to show the claims asserted by Planet 13 arise from protected activity. While Defendants have identified the alleged actions of Casa Verdi it argues is protected CCP §426.16 subd. Defendants fail to meet their first step burden to persuasively show how that conduct supplies the elements of the claims that form the of Casa Verde’s liability.

            Defendants RJNs are GRANTED as to the existence of articles, court documents, and the administrative ruling documents, but not to the “truth of the hearsay statements in the documents.” (In re Vicks (2013) 56 Cal.4th 274, 314.)

REASONING

1. Anti-SLAPP First Step – Defendants Burden of Establishing Claims Arise From Protected Activity.

            Defendants Casa Verde Capital, L.P., Casa Verde Capital EF, L.P., and Karan Wadhera (“Casa Verde”) argue that all of Plaintiff Planet 13 Holdings, Inc (“Planet 13”) claims in their Complaint directed towards Casa Verde arise from protected litigation activity under CCP § 425.16(e), presumably subd. (e)(2) [‘any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law.”).  In its notice of motion Casa Verde identifies the specific allegations it argues are protect conduct, and from those argues the 1^st, 2^nd, 4^th–11^th, 14^th and 15^th causes of action should be stricken.

a.     1st cause of action for fraud and deceit and 9^th causes of action for negligent misrepresentation

"A complaint for fraud must allege the following elements: (1) a knowingly false representation by the defendant; (2) an intent to deceive or induce reliance; (3) justifiable reliance by the plaintiff; and (4) resulting damages. Every element must be specifically pleaded. [citations omitted]" (Service by Medallion, Inc. v. Clorox Co. (1996) 44 Cal.App.4th 1807, 1816.)

“[T]he facts constituting the fraud must be alleged with sufficient specificity to allow defendant to understand fully the nature of the charge made.” (Roberts v. Ball, Hunt, Hart, Brown & Baerwitz (1976) 57 Cal.App.3d 104, 109.) Fraud actions against corporations require the plaintiff “to allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written.” (Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157.) However, the specificity requirement is “relaxed when the allegations indicate that the defendant must necessarily possess full information concerning the facts of the controversy or when the facts lie more in the knowledge of the opposite party.” (Ibid., citations omitted.)

“The elements of negligent misrepresentation are (1) the misrepresentation of a past or existing material fact, (2) without reasonable ground for believing it to be true, (3) with intent to induce another's reliance on the fact misrepresented, (4) justifiable reliance on the misrepresentation, and (5) resulting damage.” (Wells Fargo Bank, N.A. v. FSI, Financial Solutions, Inc. (2011) 196 Cal.App.4th 1559, 1573.)

            The protected litigation activity Casa Verde argues Planet 13’s 1^st and 9^th fraud cause of action arises under the alleged entering into a Stock Repurchase Agreement (“SRA”) (See Compl. ¶¶ 84–89), and the “post-judgment collection activities, which allegedly harmed” Planet 13. (Motion, p. 24; Compl. ¶¶ 91–98.) Casa Verde provides no authority as to how or why entering into an SRA (i.e. a contract) is considered protected litigation activity under the SLAPP statute. The SRA is not protected activity, as entering into a contract normally has nothing to do with protecting activities “in furtherance of a person’s right of petition or free speech” concerning a “public issue” or “issue of public interest.” (Code Civ. Proc. § 426.16, subd., (b)(1).) Nothing in the Complaint shows that the SRA was entered into as part of a Court order, or in any furtherance of litigation activities. The Court is not persuaded by Casa Verde’s belated argument that the inclusion of a release in the SRA a protected communication. settlement agreement. 

            Casa Verde argues that both the causation and damages elements of the fraud claims are predicated on the post-judgment collection activities.  The Court finds the causation and damages elements of the fraud causes of action do not arise out of protected activity.  Any incorporated alleged facts within the fraud causes of action can be viewed as background facts or context and are not directly related to any elements of the fraud causes of action. (see Baral, supra, Cal.5th at p. 394 [allegations of protected activity that merely provide context, without supporting a claim for recovery, cannot be stricken under the anti-SLAPP statute].) Thus, Casa Verde fails to meet their burden on the first step of the SLAPP analysis for the 1^st and 9^th Fraud causes of action. The Court need not address Plaintiff’s burden to show the claim has minimal merit.

b.     4^th and 6^th causes of action for Breach of Fiduciary Duty

            “The elements of a cause of action for breach of fiduciary duty are the existence of a fiduciary relationship, its breach, and damage proximately caused by that breach. Whether a fiduciary duty exists is generally a question of law.” (Hodges v. County of Placer (2019) 41 Cal.App.5th 537, 546.)

            “Our Supreme Court has acknowledged that it is difficult to enunciate the precise elements required to show the existence of a fiduciary relationship.  But the high court has noted that before a person can be charged with a fiduciary obligation, he must either knowingly undertake to act on behalf and for the benefit of another, or must enter into a relationship which imposes that undertaking as a matter of law.”  (Oakland Raiders v. National Football League (2005) 131 Cal.App.4th 621, 631–632.)  “A fiduciary duty undertaken by agreement arises when one person enters into a confidential relationship with another.”  (Das v. Bank of America, N.A. (2010) 186 Cal.App.4th 727, 742.)   

            “A fiduciary relationship is any relation existing between parties to a transaction wherein one of the parties is in duty bound to act with the utmost good faith for the benefit of the other party. Such a relation ordinarily arises where a confidence is reposed by one person in the integrity of another, and in such a relation the party in whom the confidence is reposed, if he voluntarily accepts or assumes to accept the confidence, can take no advantage from his acts relating to the interest of the other party without the latter's knowledge or consent.”  (Hodges, supra, 41 Cal.App.5th at 546–547.)  “Traditional examples of fiduciary relationships in the commercial context include trustee/beneficiary, directors and majority shareholders of a corporation, business partners, joint adventurers, and agent/principal.”  (Id. at 547.)

            Casa Verde argues the damages element of the 4^th and 6^th causes of action arise out of the protected activity of “extracting Money from El Capitan through its post-judgment collection efforts.” (Motion, p. 25:1–11; see Compl., ¶ 265.) The Court disagrees. The damages sought by Planet 13 are for the roughly $16.5 million allegedly stolen from Planet 13 due to fraud and a breach of fiduciary duty.  Planet 13 alleges the fiduciary duty arise from El Capitan’s position as a manager of Planet 13’s funds, with Casa Verde as an alleged alter ego of El Capitan. (Compl., ¶¶ 233, 236–245.) The damages that from the basis of these causes of action relate directly to the $16.5 million that is included in ¶ 234 and the prayer, which are damages that allegedly occurred prior to any litigation. (See id., ¶¶ 234(c).) Additionally, the 6^th cause of action for breach of fiduciary duty appears to be brought as a derivative action for the El Capitan Creditors, alleging that by Casa Verde forcing the SRA, Casa Verde breached its fiduciary duty. (Id., ¶¶ 268–272.) There are no allegations in the 6^th cause of action that arise from protected speech, since the allegations arise from the SRA which is not protected speech as analyzed above.

            Thus, Casa Verde does not meet their burden on the first step of the SLAPP analysis as to the 4^th and 6^th causes of action for breach of fiduciary duty.  

c.      7^th cause of action for Conversion

            “Conversion is the wrongful exercise of dominion over the property of another.  The elements of a conversion are: (1) the plaintiff's ownership or right to possession of the property at the time of the conversion; (2) the defendant's conversion by a wrongful act or disposition of property rights; and (3) damages.  It is not necessary that there be a manual taking of the property; it is only necessary to show an assumption of control or ownership over the property, or that the alleged converter has applied the property to his own use.”  (Farmers Ins. Exchange v. Zerin (1997) 53 Cal.App.4th 441, 451-452.)

            Casa Verde argues that the allegations within the 7^th cause of action for conversion arise out of post-judgment collection activities, without pointing to a specific element of conversion other than referencing Planet 13’s allegations regarding Casa Verde’s “interference” SRA with Planet 13’s right to its “fiduciary accounts.” (Motion, p. 25:12–18.)  The Court is not persuaded.

            The cause of action relates back to the fraud and breach of fiduciary causes of action, incorporates all previous paragraphs, and only mentions other litigation to provide background and context. (Id., ¶¶ 273, 275, 280–281.). Again, the money alleged stolen is the $16.5 million which was allegedly stolen prior to any litigation or other protected activity.  Planet 13 has alleged Casa Verde is an alter ego of El Capitan, El Capitan held $16.5 million for Planet 13’s benefit, that money was allegedly stolen by El Capitan, and as El Capitan’s alleged alter ego, Casa Verde is liable. (Compl., ¶¶ 280–281.)

            Thus, Casa Verde fails to meet its burden on the first step of the SLAPP analysis for the 7^th cause of action for Conversion.

d.     2^nd, 5^th, and 8^th causes of action for Aiding and Abetting

"California imposes liability on one who aids and abets the commission of an intentional tort if the person (a) knows the other's conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other to so act or (b) gives substantial assistance to the other in accomplishing a tortious result and the person's own conduct, separately considered, constitutes a breach of duty to the third person." (Berger v. Varum (2019) 35 Cal.App.5th 1013, 1025.)

            Casa Verde argues the aiding and abetting causes of action arise out of the SRA, and cites to paragraphs 257 and 294 of the Complaint which state: “In its Complaint filed in the SRA Action, Casa Verde boasts that ‘El Capitan’s business has flourished by orders of magnitude’ since Casa Verde’s investment, and has touted El Capitan’s $7.4 billion in assets under management.” (Compl., ¶¶ 257, 294.) As analyzed above, the SRA is not protected activity, and the allegations mentioning prior litigation do not connect to any elements of aiding and abetting, other than providing context and background information. (see Baral, supra, Cal.5th at p. 394 [allegations of protected activity that merely provide context, without supporting a claim for recovery, cannot be stricken under the anti-SLAPP statute]; Optional Capital, Inc. v. DAS Corp. (2014) 222 Cal.App.4th 1388, 1400 [“conduct is not automatically protected merely because it is related to pending litigation; the conduct must arise from the litigation”].) The aiding and abetting causes of action related to the  fraud, breach of fiduciary duty, and conversion causes of action which all survived as claims related to, and arising out of, unprotected activity.

            Thus, Casa Verde does not meet its burden on the first step of the SLAPP analysis for the 2^nd, 5^th, and 8^th causes of action for aiding and abetting.

e.      10^th, 11^th, 14^th and 15^th causes of action 

            The protected litigation activity Casa Verde argues for  Planet 13’s 10^th, 11^th, 14^th, and 15^th  causes of action arise under either the  “levying [of] Planet 13’s funds” or Casa Verde’s “allegedly wrongful collection efforts and the funds it obtained through those efforts.” (Motion, p. 23:16–25; see Complaint, ¶¶ 311, 313 [“Casa Verde diverted money that should have been in Planet 13’s accounts and has attempted to prevent, and has prevented, Planet 13 from utilizing its own funds”] 318–319 [“Casa Verde then extracted as much money as possible from El Capitan’s fiduciaries, before Planet 13, and other similarly situated, could retrieve their money. Casa Verde and Mr. Wadhera also continue to pursue additional funds that do not belong to them or El Capitan”].)

*** [TO BE ADDRESSED FURTHER AT THE HEARING, INCLUDING THE APPLICATION OF THE LITIGATION PRIVILEGE TOGETHER WITH THE DEMURRER.

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