Judge Kerry Bensinger, Case Number: 21STCV12297, Date: 2024-08-05 Tentative Ruling

PLAINTIFFS AND CROSS-DEFENDANTS MARIEL CARTWRIGHT, FRANCESCA ESQUENAZI, AND FUTURE CLUB, INC.’S SPECIAL MOTION TO STRIKE PURSUANT TO C.C.P. § 425.16

On April 1, 2021, Plaintiffs Mariel Cartwright (“Cartwright”) and Francesca Esquenazi (“Esquenazi”) (collectively, “Plaintiffs”) filed their Complaint against Defendant Lab Zero, Inc. (“Lab Zero”) for (1) retaliation in violation of FEHA, and (2) wrongful termination in violation of public policy.

Plaintiffs allege that Lab Zero’s shareholder, Mike Zaimont (“Zaimont”), engaged in “a pattern of rampant sexual harassment” against Lab Zero employees, including Plaintiffs. Plaintiffs confronted Zaimont. In response, Zaimont retaliated against Plaintiffs by, among other things, terminating them and failing to distribute their equity.

On May 20, 2021, Lab Zero filed a Cross-Complaint against Cartwright, Esquenazi, and Future Club, Inc. (“Future Club”) (collectively, “Cross-Defendants”). On June 30, 2021, Lab Zero filed the operative First Amended Cross-Complaint (“FACC”) against Cross-Defendants for (1) breach of contract, (2) breach of implied covenant of good faith and fair dealing, (3) breach of fiduciary duties, including the duties of loyalty and care, (4) misappropriation of trade secrets under Civil Code § 3426, et seq., (5) misappropriation of trade secrets under 18 U.S.C. § 1836, et seq., (6) conversion in violation of Labor Code § 2860, (7) conversion, (8) intentional interference with contractual relations, (9) intentional interference with prospective economic relations, (10) defamation, and (11) unfair business practices or acts in violation of Business and Professions Code § 17200 et seq.

Lab Zero alleges that, throughout their employment, Cartwright and Esquenazi engaged in and welcomed conversations with Zaimont about sex and related topics and later publicly mischaracterized those conversations as harassment to manipulate Zaimont into leaving Lab Zero, dismantle Lab Zero, and begin their own, competing business. In January 2021, Cartwright and Esquenazi registered their business, Future Club in the state of Colorado. Cartwright and Esquenazi have attempted to recruit Lab Zero employees to transfer to Future Club and to take over Lab Zero’s connections and business interests. Due to Cartwright and Esquenazi’s actions, Lab Zero perished.

On August 26, 2021, Cartwright and Esquenazi (together with Cross- Future Club) each filed a special motion to strike as to the eighth, ninth, tenth, and eleventh causes of action of the FACC.

The motions were originally scheduled for hearing on October 28, 2021. On that day, the court continued the hearing due to the parties’ voluminous evidentiary objections and to allow the parties to file evidentiary charts for their objections.

On March 1, 2022, the court denied Plaintiffs’ anti-SLAPP motions. The court held that Lab Zero's eighth and ninth causes of action for intentional interference with contractual relations and prospective economic relations, and eleventh cause of action for unfair business practices, did not arise from protected activity. As to Lab Zero's tenth cause of action for defamation, the court denied the motions based on the determination that Cartwright’s Twitter post and Plaintiffs’ statement to coworkers about Zaimont’s sexual harassment were not connected to an issue of public interest.

Cartwright, Esquenazi, and Future Club appealed. The Court of Appeal reversed and remanded the matter to this court to determine whether Lab Zero can demonstrate its claims have at least minimal merit. The remittitur issued on June 13, 2023.

The court scheduled oral argument on the second prong of Plaintiffs’ special motions to strike for February 6, 2024. At the hearing, the court continued the matter and set a briefing schedule on the second prong.

The parties previously asserted over 400 evidentiary objections. The court ruled on the objections in its March 1, 2022, order denying Cross-Defendants’ special motions to strike. On May 6, 2024, the court directed the parties to submit a joint filing incorporating the court’s rulings on the objections. In response, the parties highlighted those portions of the pleadings that were the subject of the court’s rulings.[1] The court notes that the material to which the court sustained objections are highlighted in the parties’ moving, opposition, and reply papers. The court does not rely on the highlighted material in ruling on the Second Prong.

Code of Civil Procedure section 425.16 permits a court to strike causes of action arising from an act in furtherance of the defendant’s right of free speech or petition, unless the plaintiff establishes there is a probability the plaintiff will prevail on the claim.

“The anti-SLAPP procedures are designed to shield a defendant’s constitutionally protected conduct from the undue burden of frivolous litigation.” (Baral v. Schnitt (2016) 1 Cal.5th 376, 393 (Baral).) “The anti-SLAPP statute does not insulate defendants from any liability for claims arising from the protected rights of petition or speech. It only provides a procedure for weeding out, at an early stage, meritless claims arising from protected activity.” (Id. at p. 384.)

“Resolution of an anti-SLAPP motion involves two steps. First, the defendant must establish that the challenged claim arises from activity protected by section 425.16. If the defendant makes the required showing, the burden shifts to the plaintiff to demonstrate the merit of the claim by establishing a probability of success.” (Baral, supra, 1 Cal.5th at p. 384, citation omitted.) The California Supreme Court has “described this second step as a ‘summary-judgment-like procedure.’ The court does not weigh evidence or resolve conflicting factual claims. Its inquiry is limited to whether the plaintiff has stated a legally sufficient claim and made a prima facie factual showing sufficient to sustain a favorable judgment. It accepts the plaintiff’s evidence as true, and evaluates the defendant’s showing only to determine if it defeats the plaintiff’s claim as a matter of law. ‘[C]laims with the requisite minimal merit may proceed.’” (Id. at pp. 384-385, citations omitted.) The anti-SLAPP motion need not address what the complaint alleges is an entire cause of action and may seek to strike only those portions which describe protected activity. (Id. at pp. 395-396.)

The burden of showing a probability of prevailing on the claims rests with Lab Zero. “To establish a probability of prevailing, the 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. For purposes of this inquiry, the trial court considers the pleadings and evidentiary submissions of both the plaintiff and the defendant; though the court does not weigh the credibility or comparative probative strength of competing evidence, it should grant the motion if, as a matter of law, the defendant’s evidence supporting the motion defeats the plaintiff’s attempt to establish evidentiary support for the claim. In making this assessment it is the court’s responsibility…to 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.) As to the second step inquiry, a plaintiff (or cross-complainant) seeking to demonstrate the merit of the claim “may not rely solely on its complaint, even if verified; instead, its proof must be made upon competent admissible evidence.” (Sweetwater Union High Sch. Dist. v. Gilbane Building Co. (2019) 6 Cal.5th 931, 940.)

1. Cartwright’s August 24, 2020 Twitter Post (“August 24 Tweet” or “Tweet”)[2]

Hi, The reason Lab Zero never issued a statement about MikeZ is because he hasn’t let us. I’ve considered Mike a close friend and coworker for 10 years. I’ve known he was someone who can and will screw up (like anyone!) and I’ve tried to be as understanding as any friend could by trying to listen to his side, always being willing to talk things through. We've spent many, many late nights talking and working together, and I think, genuinely, we did work well together. But June was hard. After the widely-criticized racist joke and then the inappropriate DMs and other stories, our team started speaking up. What we realized was that there was a pattern of behavior that I don’t think we had fully understood until then. A pattern of hostility, insults, threats, lying, and harassment that many on our team had not openly shared with each other before. It’s not “Well, Mike is kind of a jerk but he’s not a bad guy,” anymore. It’s “Mike is not the person we thought he was.” He doesn’t respect employees who don’t work at all hours. He gets hostile and talks down to people. He makes jokes about firing people to their faces. He makes inappropriate jokes about his dick. He threatens and insults people and our partners, both directly and in public. He straight up lies, or misrepresents things he said earlier. But multiple times, when confronted about his behavior, he'd say we were being unfair and would threaten to quit - which would jeopardize our projects, and so people would back down. He’s also outright told us that he can’t and won’t change. The thing is... I’ve been subject to harassment by him too. I tolerated years of sexual comments about my body and clothes, uncomfortable jokes, unwanted hugs. He once suggested that I masturbate when I told him I couldn’t sleep, and on another occasion suggested I 'help' him with his unfulfilled sexual needs. I made a complaint about him during my time at Reverge Labs back in 2011. I did try to talk directly to him about how I was uncomfortable in 2017, and in return he called me a hypocrite and blamed me for how I dressed. He said he didn’t want sexual harassment training. If I wanted to keep my job, I felt like I had to just deal with it. And to be totally honest - if it was just me, I probably would’ve kept dealing with it. But I’ve learned that it’s not just me. He’s done this for years, to multiple people, and I can’t continue protecting him by staying quiet about it anymore. I’m here today because we had asked him to leave over these behaviors. He apologized for his behavior and said he would, but has now turned around and said he won’t, all the while continuing to intimidate and bully employees. Mike is the 100% shareholder of the company, and as such, it is his right to stay if he wants to. So... I’ve left Lab Zero. I’ve helped build this studio from its start in 2012. I love this team and I love this job. I love what we get to make, and I think everyone at our small studio is wildly talented. I could not be more lucky than to work with everyone here. But I don’t think any of us should work in these conditions. It’s been years of behavior that we tolerated because we thought we had no other choice - but it’s clear to me now that my choice is to remove myself and move on. We really tried to make it work, and I’m sorry to our community and partners who supported us all these years. We wouldn’t have made it this far without you. Thank you. I guess that’s it. This sucks. Thanks for reading.

The elements of a defamation claim are (1) a publication that is (2) false, (3) defamatory, (4) unprivileged, and (5) has a natural tendency to injure or causes special damage.” (J-M Mfg. Co. v. Phillips & Cohen LLP (2016) 247 Cal.App.4th 87, 97.) “A statement is defamatory when it tends ‘directly to injure [a person] in respect to [that person's] office, profession, trade or business, either by imputing to [the person] general disqualification in those respects which the office or other occupation peculiarly requires, or by imputing something with reference to [the person's] office, profession, trade, or business that has a natural tendency to lessen its profits.’ (Civ. Code, § 46, subd. 3.)” (McGarry v. University of San Diego (2007) 154 Cal.App.4th 97, 112.) Moreover, where “the person defamed is a public figure, he cannot recover unless he proves, by clear and convincing evidence” that the statement at issue was made with actual malice, which is defined as “knowledge that it was false or with reckless disregard of whether it was false or not.” (Stolz v. KSFM 102 FM (1994) 30 Cal.App.4th 195, 202.)

Cross-Defendants argue the defamation claim fails because Lab Zero cannot show: (1) that the alleged defamatory statements concerned the company (rather than Zaimont personally), (2) that the statements were false, or (3) that the statements were made with actual malice, and further, that the statements were privileged. Cross-Defendants argue the defamation claim should be stricken as to Esquenazi because Lab Zero fails to identify any defamatory statement made by Esquenazi.[4]

Lab Zero alleges as follows: “Cross-Defendants Cartwright, Esquenazi, and Roes 1-25 made false statements to the public, publishers or developers working with Lab Zero, and/or Lab Zero’s employees about Zaimont in his role as a shareholder, employee, and/or director of Lab Zero. These statements included that Cross-Defendants felt that Zaimont had sexually harassed them over many years and that Zaimont had created a hostile work environment. Cross-Defendants knew and believed that these statements were false, as evidenced by Cross-Defendants’ responses to Zaimont’s comments, as well as Cross-Defendants’ own statements confirming that they did not feel their conversations with Zaimont were problematic.” (FACC, ¶ 125.) The parties agree the defamation claim is based upon Cartwright’s August 24 Tweet.

“In California, whether statements can be reasonably interpreted as referring to plaintiffs is a question of law for the court.” (SDV/ACCI, Inc. v. AT & T Corp. (9th Cir. 2008) 522 F.3d 955, 959.) “If there is no express reference to the plaintiff in a defamatory statement, the claim will fail unless the statement refers to the plaintiff by reasonable implication.” (Id.) “Words spoken or written of a stockholder or officer give no right of action to the corporation unless spoken or written in direct relation to the trade or business of the corporation.” (Washburn v. Wright (1968) 261 Cal.App.2d 789, 793.) “If they relate solely to the stockholder, officer or employee in his private or personal capacity, only the individual can complain.” (Id.; see also Restatement (Second) of Torts § 561 (1977) (“A corporation is not defamed by communications defamatory of its officers, agents or stockholders unless they also reflect discredit upon the method by which the corporation conducts its business.”); Palm Springs Tennis Club v. Rangel (1999) 73 Cal.App.4th 1, 6 (“[I]f language written about a corporate officer cannot be interpreted as saying anything about the way that officer performs his or her duties and responsibilities as an officer of the corporation, so as to have a natural tendency to affect the corporation disadvantageously in its business, the corporation has no right of action.”).)

Cross-Defendants argue that the alleged defamatory statements concern Zaimont’s sexual harassment of Carwright and others which necessarily relates only to Zaimont in his personal capacity. If so, Cross-Defendants argue Lab Zero cannot alleged it has been defamed. In support of their argument Cross-Defendants emphasize that none of the statements in the Tweet discredited Lab Zero’s products, or suggested that Lab Zero’s products were faulty, or claimed that Lab Zero is engaged in fraud or unfair business practices. The only reference to Lab Zero in the August 24 Tweet is the statement, “The Reason Lab Zero never issued a statement about MikeZ is because he hasn’t let us.” (Cartwright Decl., Ex. 4.) In other words, Cross-Defendants contend that only Zaimont and, not Lab Zero, has grounds to complain about the statement.

The court disagrees. At first glance, the August 24 Tweet appears to comment only on Zaimont’s conduct. However, as Lab Zero points out, the August 24 Tweet also states that Zaimont “doesn’t respect employees who don’t work at all hours. He gets hostile and talks down to people. He makes jokes about firing people to their faces . . . He threatens and insults people and our partners, both directly and in public.” (Cartwright Decl., Ex. 4.) Further, “when confronted about his behavior, he'd say we were being unfair and would threaten to quit - which would jeopardize our projects.” (Id.) These statements are made in the context that Zaimont is the “100% shareholder” of Lab Zero. (Id.) Taken together, it is reasonable to infer that Zaimont’s conduct is directly related to how Zaimont, as the sole shareholder of Lab Zero, managed Lab Zero’s affairs, including the working conditions, how projects were completed, and how Lab Zero interacted with its partners. It is further reasonable to infer that the statements have a natural tendency to damage Lab Zero’s business by, for example, dissuading potential clients and partners from working with Lab Zero.[5] The defamation claim survives the attack on this basis.

“[A]n opinion or legal conclusion is actionable only if it could reasonably be understood as declaring or implying actual facts capable of being proved true or false . . . . [and] is not actionable if it discloses all the statements of fact on which the opinion is based and those statements are true.” (Integrated Healthcare Holdings, Inc. v. Fitzgibbons (2006) 140 Cal.App.4th 515, 527 (internal quotation marks omitted).) “[T]ruth is a complete defense to a defamation claim.” (Hawran v. Hixson (2012) 209 Cal.App.4th 256, 293.) “In order to establish the defense, the defendant need not prove the literal truth of the allegedly libelous accusation, so long as the imputation is substantially true so as to justify the “gist or sting” of the remark.” (Campanelli v. Regents of Univ. of California (1996) 44 Cal.App.4th 572, 581–82.)

In determining whether a statement declares or implies a provably false assertion of fact, courts apply the totality of the circumstances test. (Overhill Farms, Inc. v. Lopez (2010) 190 Cal.App.4th 1248, 1261.) “Under the totality of the circumstances test, ‘[f]irst, the language of the statement is examined. For words to be defamatory, they must be understood in a defamatory sense.... [¶] Next, the context in which the statement was made must be considered.’ ” (Id.) “The ‘pertinent question’ is whether a ‘reasonable fact finder’ could conclude that the statements ‘as a whole, or any of its parts, directly made or sufficiently implied a false assertion of defamatory fact that tended to injure’ plaintiff's reputation.” (James v. San Jose Mercury News, Inc. (1993) 17 Cal.App.4th 1, 13.) “Whether challenged statements convey the requisite factual imputation is ordinarily a question of law for the court.” (Issa v. Applegate (2019) 31 Cal.App.5th 689, 703.)

Cross-Defendants argue that the August 24 Tweet is not defamatory because it contains non-actionable opinion and true statements of fact. Moreover, Cross-Defendants also point out that Lab Zero, by omission, admits or concedes that Zaimont made the statements and engaged in the sexual harassing conduct described by Cartwright. Instead, Lab Zero pivots and argues that Cartwright “voluntarily facilitated or engaged in sexually motivated conversations with Zaimont over many years during [her] employment . . . . [and] retroactively and falsely characterize these conversations as sexual harassment or the basis of a hostile work environment.” (FACC, ¶ 12.)

Lab Zero argues Cartwright’s statements are false because she “welcomed” Zaimont’s conduct. Lab Zero offers evidence to show that Zaimont and Cartwright had a years long friendship wherein any and all topics were discussed. For instance, Cartwright would discuss sex, sexual orientation, urination, menstruation, porn, plastic surgery, and body image, among other topics, with Zaimont. (See Zaimont Decl., ¶ 14.) Many of the referenced conversations took place from 2016 to 2019. As such, the totality of circumstances shows that Cartwright’s August 24, 2020 statement suggesting that Cartwright “tolerated” Zaimont’s sexual comments and that she resigned because of those behaviors may be provably false, or at least misleading, because, according to Zaimont, Cartwright regularly engaged in lewd conversations with Zaimont such that she welcomed Zaimont’s sexual comments.

The court agrees with Cross-Defendants. The gravamen of any sexual harassment claim is that the conduct is “unwelcomed.” (Meritor Sav. Bank, FSB v. Vinson (1986) 477 U.S. 57, 68.) Here, the “gist or sting” of the August 24 Tweet is that Zaimont’s comments and conduct were unwelcomed. Cross-Defendants offer evidence that Cartwright complained to Zaimont about his comments to her in 2011 and 2017. (Cartwright Decl., ¶¶ 2,3.) Zaimont’s comments to Cartwright were therefore not welcomed. Despite the complaints, Zaimont persisted in making comments to Cartwright until she resigned. (Id.) Lab Zero does not address those complaints. Cross-Defendants also point out that the truth of Cartwright’s statement that she endured “unwanted hugs” stands unchallenged.

Lab Zero’s argument boils down to the following: because there is evidence that Cartwright made sexually explicit comments to Zaimont, Cartwright essentially welcomed Zaimont’s comments and actions. Lab Zero reaches too far. Twice Cartwright went to Zaimont and asked him to stop his sexually harassing conduct. He persisted. What comes afterwards can no longer be portrayed as welcome. Zaimont was her boss and the 100% owner of Lab Zero. After asking him to stop, Cartwright continued to be sexually harassed. Zaimont’s sexual harassment cannot be characterized as welcome. As established by the record: (1) Cartwright engaged in sexually explicit or lewd conversations with Zaimont, and (2) Cartwright did not welcome Zaimont’s conduct towards her. Both facts can simultaneously exist without contradicting the other. [6]

Lab Zero also argues Zaimont’s behavior and statements were either not sexually harassing or should be viewed as welcomed because Cartwright knew Zaimont had an autism spectrum disorder and so she cannot claim to feel sexually harassed by Zaimont. This argument lacks merit. Raising autism as mitigation or a defense does not sanitize Zaimont’s conduct nor add weight to Lab Zero’s argument that Cartwright welcomed the sexual harassment.

“Actual malice” that is required in defamation cases “is quite different from the common-law standard of ‘malice’ generally required under state tort law to support an award of punitive damages.” (Cantrell v. Forest City Publishing Co. (1974) 419 U.S. 245, 252.) “Actual malice” is a term of art in defamation cases, meaning the defendant knew the statement was false or acted with reckless disregard of its falsity. (Khawar v. Globe Int'l, Inc. (1998) 19 Cal.4th 254, 262.) The test “directs attention to the ‘defendant’s attitude toward the truth or falsity of the material published . . . [not] the defendant’s attitude toward the plaintiff.” (Reader's Digest Assn. v. Super. Ct. (1984) 37 Cal.3d 244, 257; Christian Research Inst. v. Alnor (2007) 148 Cal.App.4th 71, 81 (“actual malice’ is publishing a knowingly false statement or having serious doubts as to its truth).) “[T]he ultimate issue is thus the good faith of the publisher.” (St. Amant v. Thompson (1968) 390 U.S. 727, 732.) A defendant cannot “automatically insure a favorable verdict by testifying that he published with a belief that the statements were true.” (Id.) “The finder of fact must determine whether the publication was indeed made in good faith.” (Id.)

Actual malice must be shown when the target of the defamatory statement is a limited public figure. The parties dispute whether Zaimont is a limited public figure. If he is, Cross-Defendants argue that Lab Zero fails to make a prima facie showing by clear and convincing evidence that Cross-Defendants knew the August 24 Tweet was false or acted with reckless disregard reckless disregard of its falsity.

A limited public figure is “an individual who ‘voluntarily injects himself or is drawn into a particular public controversy and thereby becomes a public figure for a limited range of issues.’” (Stolz v. KSFM 102 FM (1994) 30 Cal.App.4th 195, 203 (internal quotation marks omitted).) Where “the person defamed is a public figure, he cannot recover unless he proves, by clear and convincing evidence” that the statement at issue was made with actual malice, which is defined as “knowledge that it was false or with reckless disregard of whether it was false or not.” (Id. at p. 202.)

The court finds that Zaimont is a limited public figure. The first allegations of sexual harassment against Zaimont surfaced in the public sphere in June 2020. Thereafter, numerous articles on the allegations and Lab Zero’s dissolution followed; Zaimont also became a trending topic on Twitter. (See King Decl., Exs. 1, 82-94.) Zaimont was drawn into a public controversy. Based on the foregoing, the court finds Zaimont became a limited figure on the issue of the sexual harassment allegations made against him. Accordingly, Zaimont must furnish clear and convincing evidence that the August 24 Tweet was false or was made with reckless disregard.

As discussed above, Cross-Defendants establish that the August 24 Tweet was not false. Moreover, Lab Zero does not present sufficient evidence to establish a probability of prevailing by clear and convincing evidence that Cross-Defendants published the Tweet with knowledge of or reckless disregard for its falsity. Lab Zero’s evidence amounts to a few messages sent by Cartwright on company Slack[7] channels which purportedly show that Cartwright had serious doubts as to its truth. Cartwright stated, “in my own case too, I’m having trouble coming to terms [with] whether what I experienced WAS harassment or not so maybe a neutral party would help give that perspective? I dunno.” (Zaimont Decl., ¶ 52, Ex. 3, emphasis in original.)

However, Lab Zero advances an interpretation of Cartwright’s messages stripped of its context. Read in context, Cartwright reached out to others to cross-reference and assess her experiences by comparison. She shared her own encounters with Zaimont so that she and other employees could process their experiences with Zaimont’s conduct. (Suppl. Cartwright Decl., Ex. 4 at p. 197.) Cartwright’s investigation demonstrates a sincerity in trying to properly characterize her experience prior to issuing the Tweet. If anything, by consulting with others, Cartwright demonstrates a basis to corroborate her belief in the truth of her Tweet. Lab Zero does not carry its burden to show Cartwright seriously doubted the veracity of her August 24 Tweet, let alone that she knew the statements regarding Zaimont’s sexual harassment were false and made with reckless disregard of their falsity. Having so concluded, the court finds Lab Zero fails to show the August 24 Tweet was made with actual malice.

For the foregoing reasons, Lab Zero fails to demonstrate its defamation claim has minimal merit. The claim is therefore stricken as to Cartwright.

Given the court’s finding on the truth of the August 24 Tweet, the court likewise strikes the defamation claim as to Esquenazi. An order striking Lab Zero’s defamation claim as to Esquenazi is warranted for the further reason that Cartwright, not Esquenazi, published the August 24 Tweet. Lab Zero does not offer any evidence to show Esquenazi played a role in drafting or planning the issuance of the challenged statement.^{^[8]}

3. Merit of Lab Zero’s Intentional Interference Causes of Action (Eighth and Ninth Causes of Action)

Lab Zero alleges that Cross-Defendants “knew of the contracts, and disrupted or prevented performance of the contracts [with various developers and publishers]. Cross-Defendants engaged in a scheme, devise, and plan to dismantle and destroy Lab Zero and start a new, competing company, namely, Future Club. Integral to this plan was the disruption, cancellation, and prevention of Lab Zero’s contracts with publishers or developers.” (FACC, ¶¶ 109, 110.) Those developers include Autumn Games, Hidden Variables, 505 Games, Focus and Ark System Works. In particular Lab Zero contends that “Autumn Games, Hidden Variables, and Arc System Works each released statements that they were cancelling existing or future contracts with Lab Zero due to the contents of Cartwright’s Tweet.” (Opp. at p. 14:10-12.)

Cross-Defendants seek to strike the entirety of Lab Zero’s intentional interference causes of action because, as they contend, those causes of action are based entirely on the August 24 Tweet, i.e., protected activity. Lab Zero does not expressly rebut that characterization of the eighth and ninth causes of action. Rather, Lab Zero contends that these causes of action are based, in part, on nonprotected activity. (See Opp., p. 14:24-26.) The briefing on these causes of action (as well as the Eleventh Cause of Cause of the Action) is lacking in substance and authority.

Lab Zero invokes the “mixed” nature of its intentional interference causes of action. The California Supreme Court first addressed the issue of “mixed causes of action” in Baral v. Schnitt (2016) 1 Cal.5th 376. Subsequently, in Bonni v. St. Joseph Health System (2021) 11 Cal.5th 995, the High Court provided further guidance in how to analyze causes of action based on protected and unprotected activity. The Bonni Court stated:

“In Baral, we addressed how a court should proceed when a plaintiff has pleaded what is sometimes loosely referred to as a “ ‘mixed cause of action’ ” — that is, a cause of action that rests on allegations of multiple acts, some of which constitute protected activity and some of which do not. (Baral, supra, 1 Cal.5th at p. 382, 205 Cal.Rptr.3d 475, 376 P.3d 604.) We considered and disapproved a line of cases that had held an anti-SLAPP “motion lies only to strike an entire count as pleaded in the complaint.” (Ibid.) Such a rule would allow a plaintiff, through artful pleading, to shield particular allegations of protected activity, themselves sufficient to give rise to a claim for relief, from a motion to strike by intermingling them with unprotected acts. (Id. at pp. 387–388, 392–393, 205 Cal.Rptr.3d 475, 376 P.3d 604.) Analysis of an anti-SLAPP motion is not confined to evaluating whether an entire cause of action, as pleaded by the plaintiff, arises from protected activity or has merit. Instead, courts should analyze each claim for relief — each act or set of acts supplying a basis for relief, of which there may be several in a single pleaded cause of action — to determine whether the acts are protected and, if so, whether the claim they give rise to has the requisite degree of merit to survive the motion. (Id. at pp. 393–395, 205 Cal.Rptr.3d 475, 376 P.3d 604.)

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. At that 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.” (Baral, supra, 1 Cal.5th at p. 396, 205 Cal.Rptr.3d 475, 376 P.3d 604.) 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 Bonni Court also reaffirmed the principle stated in Baral that “[a]llegations of protected activity that merely provide context, without supporting a claim for recovery, cannot be stricken under the anti-SLAPP statute.” (Bonni v. St. Joseph Health Sys., 11 Cal. 5th at p. 1012.) Accordingly, in the retaliation claims at issue in Bonni, the Court stated:

“Here, too, we may consider whether Bonni's various allegations supply the elements of a retaliation claim or merely provide context. But to the extent Bonni has alleged various acts as a basis for relief and not merely as background, each act or set of acts must be analyzed separately under the usual two-step anti-SLAPP framework. The Hospitals bear the burden of showing that each allegation supporting Bonni's claim of recovery is one that rests on protected activity. If the Hospitals carry that burden, Bonni will then need to demonstrate some merit to his claim that those protected acts were taken for impermissible retaliatory reasons; if he cannot, those particular allegations will be stricken. Conversely, to the extent any acts are unprotected, the claims based on those acts will survive.”

Here, as alleged in the FACC and Lab Zero’s opposition, the defamatory statement (the August 24 Tweet) was made as part of a larger scheme to disrupt Lab Zero’s then-current and future contractual relationships so as to “dismantle and destroy” Lab Zero and start “a new, competing company, namely, Future Club.” (See FACC, ¶¶ 109, 110.)[9] For example, Lab Zero argues that the scheme also included misrepresentations made by Cartwright and Esquenazi to Focus Home Interactive (Focus), a Lab Zero client, regarding the status of the company. This had a ripple effect. Focus refused to make a payment due under a contract. Lab Zero, relying on that payment, could not make payroll and retain its employees. Lab Zero lost staff. Focus and 505 Games, another Lab Zero client, cancelled their contracts with Lab Zero, citing lack of staff as the reason. Lab Zero also argues that Cartwright and Esquenazi influenced employees to leave Lab Zero. The court agrees the eighth cause of action is based on protected and unprotected activity. Under Baral, these are mixed causes of action.[10] With this understanding, the court analyzes the eighth and ninth causes of action separately.

“It has long been held that a stranger to a contract may be liable in tort for intentionally interfering with the performance of the contract. The elements which a plaintiff must plead to state the cause of action for intentional interference with contractual relations are (1) a valid contract between plaintiff and a third party; (2) defendant's knowledge of this contract; (3) defendant's intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage.” (Pacific Gas & Electric Co. v. Bear Stearns & Co. (1990) 50 Cal.3d 1118, 1126.)

Interference or disruption of the contract includes conduct that “prevented performance or made performance more expensive or difficult.” (See CACI No. 2201; see also Pacific Gas & Electric Co., 50 Cal.3d at p. 1129.)

Cross-Defendants challenge the Eighth Cause of Action on the following grounds: (1) Cartwright and Esquenazi cannot be held liable for allegedly tortious acts committed while they were agents of Lab Zero; and (2) Lab Zero cannot show that any actions by Cross-Defendants proximately caused the breaches of the various contracts because Lab Zero was unable to perform the contracts irrespective of the August 24 Tweet (a challenge to the third element of the cause of action.)

The court agrees with Lab Zero that Cross-Defendants were not acting in the scope of their employment when they allegedly intentionally interfered with Lab Zero’s contractual relationships.

Here, Cross-Defendants move to strike the entirety of the cause of action. But, s discussed above, Lab Zero presents a mixed cause of action. The protected activity (the Tweet) is but one part in a series of events (“scheme, devise, or plan”). Based upon the unprotected conduct, the cause of action survives Cross-Defendants’ attack. The series of events as laid out by Lab Zero, which the court must accept as true, satisfy each and all of the elements of the cause of action. (Soukup, supra, 39 Cal.4th at. 291 [“In making this assessment it is the court’s responsibility…to accept as true the evidence favorable to the plaintiff […].”].) Lab Zero meets its burden to demonstrate minimal merit.

Notwithstanding the survival of the cause of action, the issue remains whether the court should strike the protected activity (the Tweet) from the cause of action.[11] The parties do not address this issue. No authority was presented by either side. The court looks to Baral and Bonni for guidance. In Baral, Justice Corrigan stated that when the court reaches the second step, “the burden shifts to the plaintiff to demonstrate that each challenged claim based on protected activity is legally sufficient and factually substantiated. 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. 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.” (Baral, supra,1 Cal.5th at p. 396, emphasis added.) Similarly, in Bonni, the California Supreme Court stated, that once the plaintiff reaches the second step, the plaintiff “will then need to demonstrate some merit to his claim that those protected acts were taken for impermissible retaliatory reasons; if he cannot, those particular allegations will be stricken. Conversely, to the extent any acts are unprotected, the claims based on those acts will survive.” (Bonni, supra, 11 Cal.5th at p. 1012, emphasis added.)

Lab Zero includes the Tweet in its description of the series of events (the “scheme, devise, plan”) that led to the interference with contractual relationships. The series of events as described by Lab Zero as stated in its Opposition at page 14 goes something like this: Cartwright and Esquenazi solicited and manipulated Lab Zero’s employees to leave and start a new company; as a result staff members resigned; on August 24, Cartwright published her Tweet; as a result of her Tweet, third parties including Autumn Games, Hidden Variable, Arc System each released statements they were cancelling their contracts with Lab Zero[12]; on August 25^th, Lab Zero had no choice but to lay off employees because Focus refused to pay Lab Zero $200,000; Focus decided not to pay Lab Zero because of Cartwright’s Tweet and Cartwright’s and Esquenazi’s conversations with Focus. In this way, the Tweet supports Lab Zero’s Eighth Cause of Action. Cross-Defendants’ motion to strike the Eighth Cause of Action is denied, as is the motion to strike the Tweet which supports the factual basis for the Eighth Cause of Action.[13]

b. Intentional Interference with Prospective Economic Relations (Ninth Cause of Action)

“Intentional interference with prospective economic advantage has five elements: (1) the existence, between the plaintiff and some third party, of an economic relationship that contains the probability of future economic benefit to the plaintiff; (2) the defendant’s knowledge of the relationship; (3) intentionally wrongful acts designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm proximately caused by the defendant’s action.” (Roy Allan Slurry Seal, Inc. v. American Asphalt South, Inc. (2017) 2Cal.5th 505, 512; CACI No. 2022.) The interference must be wrongful by some legal measure other than the fact of the interference itself. (Della Penna v. Toyota Motor Sales, U.S.A. (1995) 11 Cal.4th 376, 378. “[A]n act is independently wrongful if it is unlawful, that is, if it is proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard.” (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1159.)

The Ninth Cause of Action is based on the following allegation: “Cross-Defendants made defamatory statements to the public, publishers or developers working with Lab Zero, and/or Lab Zero’s employees about Zaimont in his role as a shareholder, employee, and/or director of Lab Zero as a part of their scheme, devise, and plan to disrupt these economic relations by dismantling and destroying Lab Zero and starting a new, competing company, namely, Future Club.” (FACC, ¶ 118.)

Like the Eighth Cause of Action, the Ninth Cause of Action is mixed. It rests, in part, on the August 24 Tweet (the protected activity). However, one element of the Ninth Cause of Action rests entirely on the allegation of defamation, and because of that, Cross-Defendants challenge Lab Zero’s ability to present minimal merit because Lab Zero will not be able to establish the third element of the cause of action: a wrongful act. As indicated by Paragraph 118 in the FACC, and as Lab Zero conceded on appeal, Cartwright and Esquenazi’s defamation is the wrongful act in support of this cause of action. (See Lab Zero, Inc. v. Cartwright, 2023 WL 2767921, at *9, fn. 13.) Cross-Defendants argue that, because the August 24 Tweet is not defamatory, it cannot supply the wrongfulness to state an intentional interference with prospective economic relations claim. The court agrees. The court has found that the August 24 Tweet was not defamatory because it is not provably false and was not made with actual malice. Therefore, August 24 Tweet is protected activity that is not independently wrongful. Lab Zero does not offer any argument to the contrary.

In sum, Lab Zero fails to show any wrongful conduct in support of its Ninth Cause of Action. With one element missing, Lab Zero cannot meet its burden to show minimal merit. Accordingly, the court strikes the Ninth Cause of Action.

The UCL is codified at Business and Professions Code, section 17200 et seq.¿ Section 17204 of the UCL provides that a private person “who has suffered injury in fact and has lost money or property as a result of the unfair competition” may bring a 17200 action.¿ (Bus. & Prof. Code, § 17204.)¿ “To bring a UCL claim, a plaintiff must show either an (1) unlawful, unfair, or fraudulent business act or practice, or (2) unfair, deceptive, untrue or misleading advertising. [Citation.]¿ Because the UCL is written in the disjunctive, it establishes three varieties of unfair competition—acts or practices which are unlawful, or unfair, or fraudulent.”¿ (Adhav v. Midway Rent A Car, Inc. (2019) 37 Cal.App.5th 954, 970, citations and quotations omitted.)¿ The UCL is “not an all-purpose substitute for a tort or contract action.” (Madrid v. Perot Sys. Corp. (2005) 130 Cal.App.4th 440, 452 (citations omitted).)

The FACC alleges: “Cross-Defendants engaged in unfair business practices by engaging in a scheme, devise, and plan to dismantle and destroy Lab Zero and start a new, competing company, namely, Future Club. Cross-Defendants made false and deceiving representations to the public, publishers, and/or Lab Zero’s employees in an effort to solicit, induce, recruit, and encourage them to terminate their relationships with Lab Zero or otherwise contribute to the demise and destruction of the company.” (FACC, ¶ 135.)

The parties pay little attention to the merits of the UCL claim. One observation by the California Supreme Court in Bonni fits here as well:

The complaint also identifies a handful of miscellaneous retaliatory conduct not explicitly tied to any specific event or action: that the Hospitals created a hostile work environment, blocked Bonni from career opportunities, failed to protect him from retaliation, subjected him to intolerable work conditions, and misused his private, confidential health information. The burden is on the Hospitals to demonstrate that each of these allegations entails protected activity. (Wilson, supra, 7 Cal.5th at p. 884, 249 Cal.Rptr.3d 569, 444 P.3d 706.) In the trial court, the Hospitals did not address Bonni's allegations individually. In this court, they offer no argument directed at these allegations and do not explain how they arise from peer review proceedings or any other protected activity. Accordingly, they have not carried their burden.

The entirety of Lab Zero’s argument in its opposition reads as follows: “For the reasons stated above, the claim for unfair business practices should not be stricken. To the extent the Court disagrees, only the portions relating to protected activity should be stricken since the other portions do not arise from protected activity.” (Opp., pp. 14-15.) Lab Zero, in particular, conflates the analysis of its UCL cause of action with its discussion of the merits of the eighth, ninth, and tenth causes of action. The court cannot tell what acts support Lab Zero’s UCL cause of action or how those unidentified acts satisfy each element of the cause of action. Although Bonni was a step one case, the High Court’s observation applies here as well. The court is not tasked with searching out the facts for Lab Zero or guessing at the factual basis for each element of the cause of action. It’s Lab Zero’s burden to demonstrate minimal merit. It has not done so. The court cannot determine whether any particular element rests entirely upon protected activity (like the Ninth Cause of Action) or presents a mixed cause of action (like the Eighth Cause of Action). Perhaps it was the page limit. As such, the court will hear argument from counsel.

Based on the foregoing, Cross-Defendants’ Special Motion to Strike is Granted in Part. The Ninth and Tenth Causes of Action are stricken from Lab Zero’s First Amended Cross-Complaint.[14]

The Motion is Denied with Respect to the Eighth Cause of Action, except for allegations of defamation. Allegations of defamation, if any, are stricken.

The court will hear from counsel with respect to the Eleventh Cause of Action and will discuss a briefing schedule for attorney fees and costs.

[1] The court thanks the parties for these additional efforts.

[2] The court recognizes that the FACC alleged and the Court of Appeal addressed another series of defamatory statements: Cartwright and Esquenazi’s message sent through Slack channels with other Lab Zero employees. The court notes, however, that the moving papers do not sufficiently address the Slack messages. The absence of argument on the Slack message is construed as an abandonment of the claims following remand or, alternatively, a failure of the moving party to meet its burden to demonstrate a probability of prevailing on these allegations.

[3] Because the parties’ pleadings begin by addressing the Tenth Cause of Action instead of the Ninth, the court follows suit and addresses the merits of the defamation claim first.

[4] Cross-Defendants also argue the defamation claim should be stricken as to Future Club because Lab Zero has likewise failed to identify any defamatory statement made by Future Club. The court need not resolve this argument because Lab Zero does not assert a defamation claim against Future Club. (See FACC, p. 21.)

[5] The parties grapple over whether the August 24 Tweet actually affected Lab Zero’s business to its disadvantage by resulting in companies cancelling their contracts with Lab Zero. The court looks at whether the alleged defamatory statements have a natural tendency to affect the corporation. They do. And, of course, Lab Zero takes this position elsewhere in its arguments. In any event, neither party cites authority for the proposition that actual disadvantage must have resulted from the alleged defamatory statements.

[6] Cartwright provides few details on making complaints to Zaimont about his conduct. Nevertheless, Zaimont does not dispute Cartwright’s version of events.

[7] Slack is a platform commonly used for internal work communication.

[8] Lab Zero alleges that Esquenazi and Future Club conspired with Cartwright to draft the August 24 Tweet. To support the assertion, Lab Zero requests leave to conduct discovery. However, Lab Zero’s request is untimely. Lab Zero had the opportunity to seek discovery prior to the court’s March 2022 hearing. Moreover, as discussed above, the court finds Lab Zero’s defamation claim lacks minimal merit.

[9] With respect to the Eighth Cause of Action for Intentional Interference with Contractual Relationships, Lab Zero, in its Opposition on page 14, describes the “sequence of events.”

[10] The Court of Appeal likewise treated the intentional interference claims as mixed causes of action. (See Lab Zero, Inc. v. Cartwright, 2023 WL 2767921, at *11.)

[11] The language of the cause of action itself complicates this analysis because the Eighth Cause of Action incorporates all of the prior paragraphs of the complaint and identifies very few facts in support of the cause of action. The operative paragraph reads: Cross-Defendants knew of the contracts, and disrupted or prevented performance of the contracts. Cross-Defendants engaged in a scheme, devise, and plan to dismantle and destroy Lab Zero and start a new, competing company, namely, Future Club. Integral to this plan was the disruption, cancellation, and prevention of Lab Zero’s contracts with publishers or developers.” (FACC, ¶ 110.)

[12] Cross-Defendants’ argue these companies’ press releases do not specifically refer to Cartwright’s Tweet. For example, Autumn Games, and Hidden Variable issued a public statement noting that “[a] number of Lab Zero Games employees have decided to leave the company as a result of actions by Mike Zaimont and a series of reported incidents that involved Mike over the years” and stating that they would no longer be working with Lab Zero because “Autumn Games and Hidden Variable Studios fully support those employees who have chosen to stand by their principles and leave in light of that behavior, and we find their allegations to be credible.” (Zaimont Decl., Ex. 25.) Arc System Works stated it was not working with Zaimont “following allegations of abusive and inappropriate behavior brought against him by members of his former studio, Lab Zero Games.” (Zaimont Decl., Ex. 30.) These statements, however, do not exclude Cartwright’s Tweet. A fair inference to be drawn is that Cartwright’s Tweet, recitation of events, and decision to leave Lab Zero played a part in the various companies’ decisions to sever their relationship with Lab Zero.

[13] Because of the way Lab Zero pled its Eighth Cause of Action, the court cannot tell if Lab Zero intends to argue defamation as part of the scheme, devise, plan to interfere with contractual relationships. If so, the court will preclude it and grants the motion to strike reference to defamation in support of its Eighth Cause of Action.

[14] To the extent Lab Zero seeks leave to amend, the request is DENIED. (See Schaffer v. City & Cnty. of S.F. (2008) 168 Cal.App.4th 992, 1005 [a plaintiff “cannot escape the anti-SLAPP procedures by simply amending her complaint”]; Simmons v. Allstate Ins. Co. (2001) 92 Cal.App.4th 1068, 1073-74 [“Allowing a SLAPP plaintiff leave to amend the complaint once the court finds the prima facie showing has been met [by defendant] would completely undermine the statute by providing the pleader a ready escape from section 425.16’s quick dismissal remedy.”]; Jackson v. Mayweather (2017) 10 Cal.App.5^th 1240, 1263 [“Nor can Jackson amend her complaint to cure the deficiency”].)