Judge Michael P. Linfield, Case Number: 23GDCV00515, Date: 2023-08-09 Tentative Ruling

Judge: Michael P. Linfield, Case: 23GDCV00515, Date: 2023-08-09 Tentative Ruling

Case Number: 23GDCV00515 Hearing Date: August 9, 2023 Dept: 34

SUBJECT: Motion to Strike Portions of Complaint Pursuant to CCP § 425.16

Moving Party: Defendant Vrej Sarkissian

Resp. Party: Plaintiff Akop Supikyan

SUBJECT: Motion to Strike Nominal Defendants’ Answer

Moving Party: Plaintiff Akop Supikyan

Resp. Party: Nominal Defendants Anoush Catering Company, LA Banquets LLC, Shea Holdings, LLC, and SVH Holdings, LLC

The anti-SLAPP Motion is DENIED.

The Motion to Strike is DENIED.

BACKGROUND:

On March 14, 2023, Plaintiff Akop Supikyan (“Plaintiff”) filed his Complaint against Defendant Vrej Sarkissian (“Defendant”) and Nominal Defendants Anoush Catering Company, LA Banquets LLC, Shea Holdings, LLC, and SVH Holdings, LLC (“Nominal Defendants”) on causes of action arising from the Parties’ business relationships.

On April 21, 2023, the Court found related cases 22STCV33142 and 23GDCV00515 and designated 22STCV33142 as the lead case.

On April 24, 2023, Nominal Defendants filed their Answer to the Complaint.

On April 28, 2023, Defendant filed his Answer to the Complaint.

On May 15, 2023, Defendant filed his Motion to Strike Portions of Complaint Pursuant to CCP § 425.16 (“Anti-SLAPP Motion”). In support of his Anti-SLAPP Motion, he concurrently filed: (1) Declaration of Gregg D. Zucker; (2) Declaration of Vrej Sarkissian; and (3) Request for Judicial Notice.

On May 15, 2023, Plaintiff filed his Motion to Strike Nominal Defendants’ Answer (“Motion to Strike”). In support of his Motion to Strike, he concurrently filed his Proposed Order.

On May 30, 2023, Plaintiff filed his Opposition to the Anti-SLAPP Motion.

On June 1, 2023, Nominal Defendants filed their Opposition to the Motion to Strike.

On June 5, 2023, Defendant filed his Amended Notice of Anti-SLAPP Motion, as the date of the hearing on the motion was changed by stipulation.

On August 2, 2023, Defendant filed his Reply regarding the Anti-SLAPP Motion.

On August 2, 2023, Plaintiff filed his Reply regarding the Motion to Strike.

ANALYSIS:

I. Anti-SLAPP Motion

A. Request for Judicial Notice

Defendant moves the Court to take judicial notice of four items:

(1) The Complaint filed in case 22STCV33142, which the Court found related to this matter;

(2) The Articles of Incorporation and Statement of Information for Legay Venues, filed with the California Secretary of State;

(3) An email dated September 23, 2022 from Plaintiff’s Counsel to Defendant’s former Counsel; and

(4) An email dated November 3, 2022 from Defendant’s former Counsel to Plaintiff’s Counsel.

The Court GRANTS judicial notice to the first two items.

The Court DENIES judicial notice to the latter two items. These items are not judicially noticeable.

B. Legal Standard

“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 with a public issue shall be subject to a special motion to strike, unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim.” (Code Civ. Proc., § 425.16, subd. (b)(1).)

“In making its 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).)

“A SLAPP suit—a strategic lawsuit against public participation—seeks to chill or punish a party's exercise of constitutional rights to free speech and to petition the government for redress of grievances. The Legislature enacted Code of Civil Procedure section 425.16—known as the anti-SLAPP statute—to provide a procedural remedy to dispose of lawsuits that are brought to chill the valid exercise of constitutional rights.” (Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1055–56, citations omitted.)

“In light of the foregoing, we may summarize a court's task in ruling on an anti-SLAPP motion to strike as follows. Section 425.16, subdivision (b)(1) requires the court to engage in a two-step 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. The moving defendant's burden is to demonstrate that the act or acts of which the plaintiff complains were taken ‘in furtherance of the [defendant]'s right of petition or free speech under the United States or California Constitution in connection with a public issue,’ as defined in the statute. (§ 425.16, subd. (b)(1).) If the court finds such a showing has been made, it then determines whether the plaintiff has demonstrated a probability of prevailing on the claim. Under section 425.16, subdivision (b)(2), the trial court in making these determinations considers ‘the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based.’” (Equilon Enters. v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67.)

“Only a cause of action that satisfies both prongs of the anti-SLAPP statute—i.e., that arises from protected speech or petitioning and lacks even minimal merit—is a SLAPP, subject to being stricken under the statute.” (Navellier v. Sletten (2002) 29 Cal.4th 82, 88–89, emphases in original.)

C. Discussion

1. The Parties’ Arguments

Defendant moves the Court to strike Plaintiff’s Complaint as a strategic lawsuit against public participation (SLAPP). (Anti-SLAPP Motion, p. 10:18–19.) Defendant argues that this is appropriate because: (1) the Complaint arises from Defendant’s protected activity; and (2) Plaintiff will not prevail on the allegations. (Id. at pp. 5:5, 8:15.)

Plaintiff opposes the Anti-SLAPP Motion, arguing: (1) that Plaintiff’s claims do not arise from Defendant’s protected activity; and (2) that Plaintiff will prevail on his claims as there was no meeting of the minds on a separation deal, Plaintiff remains an owner of the Nominal Defendants, and Defendant is liable on Plaintiff’s claims. (Opposition to Anti-SLAPP Motion, pp. 7:10, 10:20, 10:27, 13:13.)

Defendant reiterates his arguments in his Reply.

2. The First Prong

In his Complaint, Plaintiff pleads nine causes of action:

(1) violation of Corporations Code sections 1601 (failure to allow shareholder to inspect) and 1602 (failure to allow director to inspect);

(2) violation of Corporations Code sections 17701.13, subdivision (d), 11704.10, subdivisions (a) and (b), and 17704.07, subdivision (c)(2) (failure to follow specific requirements for corporations and managers);

(3) accounting;

(4) breach of fiduciary duty;

(5) breach of operating agreements;

(6) breach of the implied covenant of good faith and fair dealing;

(7) conversion and violation of Penal Code section 496, subdivision (c);

(8) breach of personal loan agreements; and

(9) promissory estoppel.

On the first prong, “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.’ 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. (Bonni v. St. Joseph Health Sys. (2021) 11 Cal.5th 995, 1010, quoting Baral v. Schnitt (2016) 1 Cal.5th 376, 396.)

Defendant argues that the Complaint contains four groups of allegations that attack constitutionally-protected activity:

(1) Defendant’s filing of the related case, case number 22STCV33142;

(2) The Parties’ settlement communications;

(3) Defendant’s communications to Plaintiff prior to Defendant filing his Complaint in the related case; and

(4) Defendant’s post-filing delay in serving the Complaint in the related case.

(Anti-SLAPP Motion, pp. 5–8.)

“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.” (Bonni, supra, 11 Cal.5th at p. 1010, citation omitted.)

“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's goals of shielding protected activity, which would have been fully served by striking from the complaint only the allegations of protected activity. 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. Plaintiffs do, of course, have considerable discretion in how to shape their pleadings, and as Okorie observed, there is nothing to stop them from ‘deliberately or innocently’ pleading causes of action that ‘allege both protected and unprotected activity.’ [Citation omitted.] But at the end of the day, we do not believe the Legislature in enacting the anti-SLAPP statute intended to make the protections of the anti-SLAPP law turn on a plaintiff's pleading choices.” (Bonni, supra, at p. 1011, quoting Okorie v. Los Angeles Unified Sch. Dist. (2017) 14 Cal.App.5th 574, 587.)

“If a cause of action contains multiple claims and a moving party fails to identify how the speech or conduct underlying some of those claims is protected activity, it will not carry its first-step burden as to those claims. The nonmovant is not faced with the burden of having to make the moving party's case for it.” (Bonni, supra, at p. 1011.)

Courts may “determine whether particular acts alleged within the cause of action supply the elements of a claim or instead are incidental background. This approach is consistent with Baral, which reaffirmed that ‘[a]ssertions that are ‘merely incidental’ or ‘collateral’ are not subject to section 425.16. Allegations of protected activity that merely provide context, without supporting a claim for recovery, cannot be stricken under the anti-SLAPP statute.’” (Bonni, supra, at p. 1012, quoting Baral, supra, 1 Cal.5th at p. 394.)

Here, Plaintiff pleads nine causes of action. Defendant alleges that the four previously-listed groups of allegations constitute protected activity that supply the elements of the causes of action.

The Court disagrees with Defendant’s argument.

First, Defendant’s filing of the related case is an incidental allegation in this case. Plaintiff has not sued for malicious prosecution, tortious abuse of process, harassment, extortion, or another cause of action that would make the filing of the related case relevant to elements of such causes of action. (See, for example, Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 734–35; Rusheen, supra, 37 Cal.4th at pp. 1056–57; and Flatley v. Mauro (2006) 39 Cal.4th 299, 320–32.) Rather, the allegations in this Complaint regarding the related case are merely incidental allegations. These incidental allegations are unrelated to the elements of the causes of action at issue, and thus they do not fall under Code of Civil Procedure section 425.16.

Second, the alleged existence of settlement discussions between the Parties (and, presumably, the affirmative defense of litigation privilege) is merely incidental to the claims made in the Complaint in this case. Again, Plaintiff has not sued for any causes of action that would make the existence of settlement discussions (and thus litigation privilege) relevant to this case. Rather, this Complaint only mentions that the Parties previously engaged in settlement discussions as an incidental allegation that purportedly explains why this case was filed.

Third, Defendant’s communications to Plaintiff prior to Defendant filing his Complaint in the related case are merely incidental to the claims made in Plaintiff’s Complaint. While Plaintiff does style Defendant’s communications on multiple occasions as “coercive,” “coercion”, and “extortive,” these communications are not part of any of the activities that allegedly constitute the causes of action at issue. Rather, Plaintiff alleges that Defendant engaged in a variety of other behaviors that created liability, such as: (1) not allowing Plaintiff, who is a shareholder, director, and manager of Nominal Defendants, to review the books of the Nominal Defendants; (2) misappropriating the assets of the Nominal Defendants, commingling their funds, and converting their funds for Defendant’s personal benefit; and (3) failing to reimburse loans that should have been reimbursed. None of these activities constitute conduct protected under the First Amendment or Code of Civil Procedure section 425.16, and the Parties’ communications are merely incidental to these unprotected activities.

Finally, any alleged delay in service of the Complaint in the related case is incidental to the causes of action in this Complaint. Plaintiff does not in any way rely upon the alleged delay when discussing the elements of the causes of action, nor would such a delay be relevant to the elements of the causes of action. Such characterizations of unrelated conduct do not invoke anti-SLAPP protections pursuant to Code of Civil Procedure section 425.16.

The Court notes that the Complaint has 97 paragraphs of “factual allegations.” Many of the allegations – including those complained of above – are either irrelevant or incidental to the causes of action asserted.

As the moving party, Defendant has the initial burden on an anti-SLAPP motion to demonstrate that the acts of which Plaintiff complained were taken in furtherance of Defendant’s protected rights. (Equilon Enters., supra, 29 Cal.4th at p. 67.) Defendant has not met his initial burden here.

Since the Court finds that Defendant has not met its initial burden, it does not reach the parties’ arguments made regarding the second prong of the anti-SLAPP test.

D. Conclusion

The anti-SLAPP Motion is DENIED.

II. Motion to Strike

A. Legal Standard

Any party, within the time allowed to respond to a pleading, may serve and file a notice of motion to strike the whole or any part thereof. (Code Civ. Proc., § 435, subd. (b)(1).) The notice of motion to strike a portion of a pleading shall quote in full the portions sought to be stricken except where the motion is to strike an entire paragraph, cause of action, count or defense. (Cal. Rules of Court, rule 3.1322.)¿¿¿¿¿¿¿

The grounds for a motion to strike shall appear on the face of the challenged pleading or form any matter of which the court is required to take judicial notice. (Code Civ. Proc., § 437, subd. (a).) The court then may strike out any irrelevant, false, or improper matter inserted in any pleading and strike out all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court. (Code Civ. Proc., § 436.)¿¿

When the defect which justifies striking a complaint is capable of cure, the court should allow leave to amend. (Perlman v. Mun. Ct. (1979) 99 Cal.App.3d 568, 575.)¿¿¿¿¿¿¿

B. Discussion

1. The Parties’ Arguments

Plaintiff moves the Court to: (1) strike Nominal Defendants’ Answer in its entirety; or (2) in the alternative, strike every line of the Answer except for the twelfth and twentieth affirmative defenses, and change all references to “Defendants” to “Nominal Defendants.” (Motion to Strike, p. 16:2–22.) Plaintiff argues that this would be appropriate because Nominal Defendants are actually the real plaintiffs-in-interest and thus they are not allowed to mount merits-based defenses. (Id. at pp. 11:10–16, 12:15–18.)

Nominal Defendants opposes the Motion to Strike, arguing: (1) that Nominal Defendants’ Answer is a product of Plaintiff’s unclear pleading; and (2) that even in a purely derivative action, Nominal Defendants are entitled to assert some defenses. (Opposition to Motion to Strike, pp. 1:27, 3:8–9.)

In his Reply, Plaintiff argues: (1) that the Complaint is not ambiguous; and (2) that Nominal Defendants concede that they can only plead certain procedural defenses. (Reply regarding Motion to Strike, pp. 2:5, 3:17.)

2. Ambiguity

The Complaint is not ambiguous. The Complaint provides a clear list of the allegations, a clear list of the causes of action, and a clear statement of whom the causes of action are pleaded against. Thus, ambiguity is not an issue here.

3. Derivative Lawsuits, Nominal Defendants, and Procedural Affirmative Defenses

a. Legal Standard

“A shareholder's derivative suit seeks to recover for the benefit of the corporation and its whole body of shareholders when injury is caused to the corporation that may not otherwise be redressed because of failure of the corporation to act. Thus, the action is derivative, i.e., in the corporate right, if the gravamen of the complaint is injury to the corporation, or to the whole body of its stock and property without any severance or distribution among individual holders, or it seeks to recover assets for the corporation or to prevent the dissipation of its assets. A stockholder's derivative suit is brought to enforce a cause of action which the corporation itself possesses against some third party, a suit to recompense the corporation for injuries which it has suffered as a result of the acts of third parties. The management owes to the stockholders a duty to take proper steps to enforce all claims which the corporation may have. When it fails to perform this duty, the stockholders have a right to do so. Thus, although the corporation is made a defendant in a derivative suit, the corporation nevertheless is the real plaintiff and it alone benefits from the decree; the stockholders derive no benefit therefrom except the indirect benefit resulting from a realization upon the corporation's assets. The stockholder's individual suit, on the other hand, is a suit to enforce a right against the corporation which the stockholder possesses as an individual.” (Jones v. H. F. Ahmanson & Co. (1969) 1 Cal.3d 93, 106–07 [cleaned up].)

“[T]he particular stockholder who brings the suit is merely a nominal party plaintiff. It is the corporation that is the ultimate beneficiary of such a derivative suit. Thus, the corporation is the real party plaintiff in the action. Though the corporation is essentially the plaintiff in a derivative action, when a derivative suit is brought to litigate the rights of the corporation, the corporation must be joined as a nominal defendant. The corporation must be joined because its rights, not those of the nominal plaintiff, are to be litigated, and to offer the real defendants res judicata protection from later suits. Naming the corporation a defendant, not a plaintiff, follows from the joinder rules: ‘If the consent of any one who should have been joined as plaintiff cannot be obtained, he may be made a defendant . . . .’ (Code Civ. Proc., § 382.) So although the corporation is made a defendant in a derivative suit, the corporation nevertheless is the real plaintiff.” (Patrick v. Alacer Corp. (2008) 167 Cal.App.4th 995, 1003–04 [cleaned up].)

b. Discussion

The Parties both cite Patrick, supra, 167 Cal.App.4th at 1004–1011 for their respective arguments on whether Nominal Defendants can file an answer in this matter.

“The question now arises – if the corporation is the real plaintiff in a derivative action and the potential beneficiary of any recovery, how can it oppose the action? A demurrer may be filed only by the party against whom a complaint has been filed. The complaint in a derivative action is filed on the corporation's behalf; not against it. It is only a nominal defendant. The only reason the corporation is named a nominal defendant is its refusal to join the action as a plaintiff. The corporation has traditionally been aligned as a defendant because it is in conflict with its stockholder over the advisability of bringing suit. In a real sense, the only claim a shareholder plaintiff asserts against the nominal defendant corporation in a derivative action is the claim the corporation has failed to pursue the litigation.” (Patrick, supra, at p. 1004.)

After discussing standing and the “special litigation committee” defense, Patrick concluded “that a nominal defendant corporation generally may not defend a derivative action filed on its behalf. The corporation may assert defenses contesting the plaintiff's right or decision to bring suit, such as asserting the shareholder plaintiff's lack of standing or the SLC defense. (Corp. Code, § 800, subd. (b)(1); [other citation omitted].) We need not now enumerate what other defenses a corporation may assert in a derivative action, if any. It suffices to hold the corporation has no ground to challenge the merits of a derivative claim filed on its behalf and from which it stands to benefit.” (Patrick, supra, at p. 1005.)

Here, none of the causes of action are pleaded against Nominal Defendants. All of the causes of action are pleaded against Defendant Sarkissian. Thus, Nominal Defendants are just that — nominal.

Defendant Sarkissian and the Nominal Defendants filed separate answers to the Complaint. Nominal Defendants’ Answer includes 22 affirmative defenses – many of which appear to be substantive defenses that reach the merits of Plaintiff’s pleading (for example: justified, excuse, and tortious acts or omissions of others).

Notably, Plaintiff is the one who seems to admit that the twelfth affirmative defense (that Plaintiff lacks capacity and/or standing) and twentieth affirmative defense (that Plaintiff failed to perform conditions precedent for this derivative action) are allowed under the reasoning discussed in Patrick.

Further, Patrick does not reach the question of whether there are other affirmative defenses a corporate entity may argue as a nominal defendant against a shareholder in a derivative suit.

Many of the affirmative defenses listed in Nominal Defendants’ Answer appear to be procedural, not substantive (for example: laches and statute of limitations). In part because of the still-unsettled nature of this area of the law and in part because of the limited case law provided to the Court by the Parties, it is unclear to the Court how it should parse through each of the 22 affirmative defenses — some of which, in certain circumstances, straddle the line between procedural and merits-based affirmative defenses (for example: excuse, complete performance, and consent). It is hard for the Court to see why certain other affirmative defenses (for example: inadequate representative and reservation of rights) should not remain in the Answer.

Ultimately, Patrick was about a nominal defendant’s demur to a nominal plaintiff’s complaint — not a nominal plaintiff’s motion to strike a nominal defendant’s answer. “The court must, in every stage of an action, disregard any error, improper ruling, instruction, or defect, in the pleadings or proceedings which, in the opinion of said court, does not affect the substantial rights of the parties. . . .” (Code Civ. Proc., § 475.) Here, the raising of various defenses — some of which appear to be substantive, and others of which are allowed under Patrick — does not, at this time, affect the substantial rights of the Parties. Whether individual affirmative defenses will be allowed in this derivative suit is a question for another day.

Similarly, the fact that Nominal Defendants styled themselves as “Defendants” in their Answer does not affect the substantial rights of the Parties. Nominal Defendants are clearly nominal defendants in this litigation, and they will be treated as such.

C. Conclusion

The Motion to Strike is DENIED.