Judge Robert S. Draper, Case 22STCV28003 2023-02-21 Tentative Ruling

Plaintiff’s Ex Parte Application to Modify Preliminary Injunction or Lift Stay is DENIED.

This is an action for breach of a commercial lease. The Complaint alleges as follows.

Plaintiff Hawkeye Entertainment, LLC (“Hawkeye”) entered into a lease agreement for commercial space (the “Subject Property”) with Defendants Smart Capital Investment I, LLC, Smart Capital II, LLC, Smart Capital Investment III, LLC, Smart Capital IV, LLC, and Smart Capital V, LLC’s (together, “Smart Capital”) predecessor-in-interest. (Compl. ¶¶ 9-14.) Hawkeye then sublet the Subject Property to Plaintiff W.E.R.M. (“WERM”, and with Hawkeye, “Plaintiffs”). (Compl. ¶ 20.) Smart Capital operates as Plaintiff’s landlord under the lease. (Compl. ¶ 21.)

Prior to Smart Capital’s purchase of the Subject Property, Plaintiffs invested substantial resources into making the Subject Property code compliant. (Compl. ¶ 23.) Additionally, Plaintiffs obtained a conditional use permit for the on-site sale of alcoholic beverages (the “CUB Permit”) for the Subject Property. (Ibid.) With the CUB Permit obtained, WERM opened and began operating a successful night club (the “Night Club”) in the subject property. (Compl. ¶ 23.)

Plaintiffs are current with all obligations under the Lease. (Compl. ¶ 25.) This was confirmed in a recent Bankruptcy Court evidentiary hearing on a Motion to Assume Lease and Sublease (“Assumption Motion”) filed by Hawkeye and opposed by Smart Capital. (Ibid.)

Nonetheless, Smart Capital, through its manager, Defendant Michael Chang (“Chang”, and with Smart Capital, “Defendants”), have attempted to interfere with WERM’s operation of the Night Club. (Compl. ¶ 33.) Defendants have allegedly failed to cooperate with Plaintiffs’ effort to obtain a permit to serve alcoholic beverages on site (the “CUB”); manufactured erroneous defaults; contacted regulatory agencies without justification to interfere with Plaintiffs businesses; contacted the Los Angeles Police Department without justification to interfere with Plaintiffs’ business operations; contacted Plaintiffs’ business partners to interfere with contractual relations; failed to take reasonable steps to secure the Subject Property from criminal activity; trespassed onto the Subject Property without permission during business hours; interfered with Plaintiffs’ employees while they were trying to perform their duties; and, failed to maintain the building as required under the lease. (Compl. ¶ 35.)

On August 29, 2022, Plaintiffs filed the Complaint asserting seven causes of action:

On September 28, 2022, Defendants filed a Motion to Strike Plaintiffs’ Prayer for Punitive Damages.

On December 14, 2022, the Court granted Plaintiffs’ Motion for Preliminary Injunction. The Court ordered Plaintiffs to post a bond in the amount of $100,000 within one week of the issuance of the order, and for Defendants to sign and notarize the CUB application within one day of the issuance of the bond.

On December 27, 2022, Plaintiffs filed a Motion for Issuance of an Order to Show Cause Re: Contempt for Violation of Preliminary Injunction Order and Request for Sanctions. Plaintiffs argued that Defendants failed to sign and provide the CUB Application as required by the Court. Additionally, Plaintiffs contended that “[s]ince the Order directs the execution and notarization of the CUB APPLICATION FOR CONTINUED USE OF ALCOHOL SERVICE, pursuant to the California Civil Procedure Code § 917.3, a stay is not automatic unless the CUB APPLICATION FOR CONTINUED USE OF ALCOHOL SERVICE was signed and notarized by the Defendants and ‘deposited in the office of the clerk of the court where the original judgment or order is entered.’” (Motion at p. 8; quoting CCP section 917.3)

On December 28, 2022, Defendants filed a Notice of Appeal regarding the Preliminary Injunction.

On January 18, 2023, Defendants lodged the completed CUB application with the Court.

On February 6, 2023, the Court denied Plaintiffs’ Motion for an Issuance of Order to Show Cause Re: Contempt for Violation of Preliminary Injunction Order finding that “Section 917.3 clearly does not give this Court authority to further enforce the preliminary injunction pending appeal.” (2/6/23 Minute Order at p. 4.)

On February 9, 2023, Plaintiffs filed the instant Ex Parte Application to Modify the Preliminary Injunction, Lift Stay, or Order an Undertaking.

On February 10, 2023, the Court heard the instant motion. The Court found that it could not lift the stay under section 917.3, but ordered supplemental briefing on the issue of whether a bond should be issued.

On February 15, 2023, Plaintiffs filed a Supplemental Brief on Issue of Defendants’ Undertaking/Bond.[1]

Also on February 15, 2023, Defendants filed an Opposition to Plaintiff’s Supplemental Briefing.

First, Plaintiffs ask this Court to lift the stay pending appeal, arguing that Code of Civil Procedure section 917.3 does not apply as the preliminary injunction is prohibitive rather than mandatory.

“Judicial estoppel is an equitable doctrine that precludes a party from gaining an advantage by asserting one position, and then later seeking an advantage by taking a clearly inconsistent position.” (Hamilton v. State Farm Fire & Casualty Co. (9th Cir. 2001) 270 F.3d 778, 782.) Factors in determining whether to apply judicial estoppel include: (1) whether a party’s later position is clearly inconsistent with its earlier position; (2) whether the party has succeeded in persuading a court to accept that party’s earlier position so that judicial acceptance of an inconsistent position would create the perception that either the first or the second court was misled; and (3) whether the party seeking to assert an inconsistent position would derive an unfair advantage or impose an unfair detriment on the opposing party if not estopped. (See Id.)

Compliance with the December 14, 2022 Preliminary Injunction Order is not affected by the Appeal because the appeal does not act to automatically stay the Preliminary Injunction Order. Cal. Civ. Proc. Code § 917.3 clearly and unequivocally requires compliance with preliminary injunctions mandating the execution of instruments. (Plaintiff’s Motion for Issuance of Order to Show Cause Re: Contempt at pp. 7-8.)

In reliance upon Plaintiffs’ argument, Defendants lodged the completed CUB Application with the Court, thereby staying this Court’s jurisdiction to enforce the Preliminary Injunction.

At the February 6, 2023 hearing on the matter, the Court found that section 917.3 applied, and “clearly does not give this Court authority to further enforce the preliminary injunction pending appeal.”

Undeterred, on February 9, 2023, Plaintiffs filed the instant Ex Parte Application in which they argued:

The Preliminary Injunction Order is prohibitive and requiring the CUB Application to be signed does not trigger an automatic stay because the CUB Application merely extends the CUB (not modifying Plaintiffs’ current operations) and the requirements of Cal. Civ. Pro. Code § 917.3 are not applicable because the CUB Application is not an ‘instrument.’ (Plaintiff’s Ex Parte Application to Lift Stay at p. 11.)

Plaintiffs do not elaborate on how the facts have changed such that Plaintiffs’ perspective on the applicability of section 917.3 so drastically moved in a week’s time. The Court can find no reason for this paradox other than that Plaintiffs argued for section 917.3’s applicability when it was beneficial to them, and now argue for its inapplicability when its application is detrimental to them.

This is precisely the type of position that judicial estoppel is intended to preclude.

Accordingly, the Court finds that section 917.3 applies to the Preliminary Injunction, and that the Court’s jurisdiction to enforce the Preliminary Injunction was stayed upon Defendants’ filing of the CUB Application with this Court.

Next, Plaintiffs contend that should the Court decline to lift the stay, it must require Defendants to post a bond in the amount of $30,000,000 pursuant to Code of Civil Procedure section 917.2

The perfecting of an appeal shall not stay enforcement of the judgment or order of the trial court if the judgment or order appealed from directs the assignment or delivery of personal property, including documents, whether by the appellant or another party to the action, or the sale of personal property upon the foreclosure of a mortgage, or other lien thereon, unless an undertaking in a sum and upon conditions fixed by the trial court, is given that the appellant or party ordered to assign or deliver the property will obey and satisfy the order of the reviewing court, and will not commit or suffer to be committed any damage to the property, and that if the judgment or order appealed from is affirmed, or the appeal is withdrawn or dismissed, the appellant shall pay the damage suffered to such property and the value of the use of such property for the period of the delay caused by the appeal. The appellant may cause the property to be placed in the custody of an officer designated by the court to abide the order of the reviewing court, and such fact shall be considered by the court in fixing the amount of the undertaking. If the judgment or order appealed from directs the sale of perishable property the trial court may order such property to be sold and the proceeds thereof to be deposited with the clerk of the trial court to abide the order of the reviewing court;¿such fact shall be considered by the court in fixing the amount of the undertaking.

Plaintiffs contend that section 917.2 applies to documents generally, whereas section 917.3 applies only to “instruments”; Plaintiffs argue that as the CUB Application is a document rather than an instrument, section 917.2 controls and mandates the issuance of a bond or undertaking for the stay to apply.

However, as discussed above, Plaintiffs are judicially estopped from contending that section 917.3 does not apply. Moreover, as California Courts have repeatedly held, section 917.2 applies to “judgments ordering the delivery of personal property” whereas 917.3 applies to “judgments directing the execution of instruments.” (See Miller v. Gross (1975) 48 Cal.App.3d 608, 612.)

While Plaintiffs argue that the CUB Application does not fall neatly within the category of “instruments,” it can hardly be said that the CUB Application is better defined as Plaintiffs’ “personal property.”

Accordingly, the Court finds that section 917.2 does not apply to the CUB Application, and that as section 917.3 applies, this Court’s jurisdiction to enforce the Preliminary Injunction ended upon Defendants’ lodging of the CUB Application with the Court.

While the Court understands Plaintiffs’ frustration, it reiterates that if there is relief to be found, it will be found in the Court of Appeal.

[1] The Court notes that, in what has become an unfortunate pattern in Plaintiffs’ briefing, this supplemental brief was filed a day after it was ordered by the Court without explanation. The Court admonishes Plaintiffs’ Counsel to abide by this Court’s orders and the California Rules of Court and to ensure that Plaintiffs’ briefs are timely filed henceforth out of respect for the Court’s, and opposing counsel’s, time.

The hearing on Defendants’ Motion to Strike Punitive Damages from the Complaint is CONTINUED for thirty days pursuant to Defendants’ request.

This is an action for breach of a commercial lease. The Complaint alleges as follows.

On August 29, 2022, Plaintiffs filed the Complaint asserting seven causes of action:

On September 28, 2022, Defendants filed the instant Motion to Strike. The hearing on the instant motion was originally set for February 8, 2023.

On December 14, 2022, the Court granted Plaintiffs’ Motion for Preliminary Injunction.

On February 6, 2023, pursuant to Plaintiffs’ request, the hearing on the instant motion was continued until February 16, 2023.

On February 10, 2023, the Court continued the instant hearing until February 17, 2023.

Defendants move to strike Plaintiffs’ Prayer for Punitive Damages from the Complaint.

California Civil Code section 3294 authorizes the recovery of punitive damages in non-contract cases where “the defendant has been guilty of oppression, fraud, or malice . . . .” (Civ. Code § 3294(a).) “‘Malice’ means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.” (Id. § 3294(c)(1).) “‘Oppression’ means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights.” (Id.,§ 3294(c)(2).) “‘Fraud’ means an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.” (Id., § 3294(c)(3).)

Punitive damages thus require more than the mere commission of a tort. (See Taylor v. Superior Court (1979) 24 Cal.3d 890, 894-95.) Specific facts must be pleaded in support of punitive damages. (See Hillard v. A.H. Robins Co. (1983) 148 Cal.App.3d 374, 391-92.)

Here, Defendants contend that Plaintiffs fail to allege any facts that show Defendants acted with malice, oppression, or fraud. Defendants argue the Complaint does not allege with specificity any acts that exceed an allegation of a mere tort.

In Opposition, Plaintiffs contend, first, that the current stay of the preliminary injunction pending appeal stays this matter as well, as a stay suspends other matters “upon the judgment or order appealed from or upon the matters embraced therein or affected thereby. . .” (CCP § 916(a).) Plaintiffs argue that, as the Seventh Cause of Action for Specific Performance is based on Defendants’ failure to sign the CUB Application, which is the subject of the Preliminary Injunction, the instant Motion to Strike is stayed as well.

Plaintiffs are incorrect. The outcome of Defendants’ appeal of the preliminary injunction has no bearing whatsoever on the outcome of the instant motion.

Next, Plaintiffs contend that the Complaint states facts demonstrating that Defendants acted with fraud, malice, or oppression. Plaintiffs note that the Complaint alleges that Defendants falsely informed their longtime clients that Fearless LA’s use of the Premises and arrangement with Plaintiff was a default of the Lease and in violation of the CUB.

While the Court is inclined to hold that the Complaint alleges sufficient facts demonstrating malice, fraud, or oppression to allow a trier of fact to consider the matter of punitive damages, Defendants correctly note that Plaintiffs’ late filing of the Opposition deprives Defendants of their opportunity to Reply. Accordingly, pursuant to Defendants’ request, the Court continues the hearing on Defendants’ Motion to Strike for thirty days.

[1] In their Reply, Defendants note that Plaintiffs’ Opposition was filed the day before the hearing and was therefore substantially late. Defendants ask the Court to disregard the Opposition, or to continue the hearing such that Defendants can prepare a Reply.

Superior Court of California

County of Los Angeles

Department 78

HAWKEYE ENTERTAINMENT, LLC, et al., Plaintiffs, vs. MICHAEL CHANG, et al.; Defendants.	Case No.:	22STCV28003
	Hearing Date:	February 21, 2023

	[TENTATIVE] RULING RE: DEFENDANTS MICHAEL CHANG, SMART CAPITAL INVESTMENTS I, LLC, SMART CAPITAL INVESTMENTS II, LLC, SMART CAPITAL INVESTMENTS III, LLC, SMART CAPITAL INVESTMENTS IV, LLC, SMART CAPITAL INVESTMENTS V, LLC, AND TOP PROPERTIES CORPORATION’S ANTI-SLAPP MOTION.

Defendants Code of Civil Procedure section 425.16 Motion to Strike is DENIED.

FACTUAL BACKGROUND

This is an action for breach of a commercial lease. The Complaint alleges as follows.

PROCEDURAL HISTORY

On August 29, 2022, Plaintiffs filed the Complaint asserting seven causes of action:

1. Breach of Contract;

2. Breach of Implied Covenant of Good Faith and Fair Dealing;

3. Breach of Implied Covenant of Quiet Enjoyment;

4. Negligent Interference with Prospective Economic Advantage;

5. Intentional Interference with Prospective Economic Advantage;

6. Intentional Interference with Contractual Relations; and,

7. Specific Performance

On September 28, 2022, Defendants filed a Motion to Strike Plaintiffs’ Prayer for Punitive Damages. That Motion is to be heard on February 8, 2023.

On October 31, 2022, Defendants filed the instant Anti-SLAPP Motion.

On November 7, 2022, Plaintiffs filed a Motion for Preliminary Injunction.

On December 6, 2022, Plaintiffs filed an Opposition to the instant motion.

On December 12, 2022, Defendants filed a Reply.

On December 13, 2022, Plaintiffs filed a Notice of Errata and attached the documentation they intended to attach to their Opposition.

On December 14, 2022, the Court granted Plaintiffs’ Motion for Preliminary Injunction.

On December 19, 2022, the Court heard the instant Anti-SLAPP Motion. The Court ordered supplemental briefing such that Plaintiffs could submit a revised Opposition containing citations to admissible evidence demonstrating the merits of their Fourth, Fifth, and Sixth Causes of Action.

On January 10, 2023, Plaintiffs filed their Supplemental Opposition. This Opposition was substantially overlong.

On February 9, 2023, Defendants filed a Supplemental Reply.

DISCUSSION

I. EVIDENTIARY OBJECTIONS

Defendants’ Objections to the Previously Filed Declarations Attached as Exhibits

Defendants’ Objections to Exhibits B, C, and D are SUSTAINED.

Defendants’ Objections to the Declaration of Armen Manoukian

Defendants’ Objections to the Declaration of Armen Manoukian are OVERRULED.

Defendants’ Objections to the Declaration of Sandford L. Frey

Defendants’ Objections to paragraphs 3, 15, 17, and 24 are SUSTAINED.

The remaining objections are OVERRULED.

Defendants’ Objections to the Declaration of Fadi K. Rasheed

Defendants’ Objections are SUSTAINED.

Defendants’ Objections to the Declaration of Adi McAbian

Defendants’ Objections to paragraphs 3, 6, 7, 8, 11, 21, 23, 31, 47-52, and 54 are SUSTAINED.

The remaining objections are OVERRULED.

II. REQUEST FOR JUDICIAL NOTICE

The court may take judicial notice of “official acts of the legislative, executive, and judicial departments of the United States and of any state of the United States,” “[r]ecords of (1) any court of this state or (2) any court of record of the United States or of any state of the United States,” and “[f]acts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.” (Evid. Code § 452, subds. (c), (d), and (h).)

Evidence Code Section 452 provides that judicial notice may be taken for facts and propositions that are “not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.” (Cal. Evid. Code § 452(h).) Further, “a court may take judicial notice of [recorded documents and] the fact of a document's recordation, the date the document was recorded and executed, the parties to the transaction reflected in a recorded document, and the document's legally operative language, assuming there is no genuine dispute regarding the document's authenticity. From this, the court may deduce and rely upon the legal effect of the recorded document, when that effect is clear from its face.” (Scott v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 743, 745-755.)

Taking judicial notice of a document is not the same as accepting the truth of its contents or accepting a particular interpretation of its meaning. (Fremont Indem. Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 113-14 (citations and internal quotations omitted).) In addition, judges “consider matters shown in exhibits attached to the complaint and incorporated by reference.” (Performance Plastering v. Richmond American Homes of California, Inc. (2007) 153 Cal.App.4th 659, 665.) However, “[w]hen judicial notice is taken of a document . . . the truthfulness and proper interpretation of the document are disputable.” (Aquila, Inc. v. Sup. Ct. (2007) 148 Cal.App.4th 556, 569 (quoting StorMedia Inc. v. Sup. Ct. (1999) 20 Cal.4th 449, 457 n. 9).)

The party requesting judicial notice must (a) give each adverse party sufficient notice of the request to enable the adverse party to prepare to meet the request and (b) provide the court with sufficient information to enable it to take judicial notice of the matter. (Cal. Evid. Code § 453.)

Plaintiffs request judicial notice of the following:

1. Transcript from the Evidentiary Hearing in the Bankruptcy Court. (Ex. A.)

2. Orders from the Bankruptcy Court. (Exs. B-G.)

3. Order from the District Court concerning the Appeal. (Ex. H.)

4. Motion to Dismiss filed in Bankruptcy Court by Defendants. (Ex. I.)

5. Adversary Complaint filed in bankruptcy Court. (Ex. J.)

Plaintiffs’ requests for Judicial Notice are GRANTED.

III. ANTI-SLAPP MOTION

Plaintiffs move to strike the Second, Third, Fourth, Fifth, and Sixth Causes of Action from the Complaint pursuant to Code of Civil Procedure section 425.16.

In assessing a defendant’s section 425.16 special motion to strike, the court must engage in a twostep process. (Shekhter v. Financial Indem. Co. (2001) 89 Cal.App.4th 141, 150.) First, the court must decide whether the defendant has met the threshold burden of showing that the plaintiff’s cause of action arises from the defendant’s constitutional rights of free speech or petition for redress of grievances. (Id.) This burden may be met by showing the act which forms the basis for the plaintiff's cause of action was an act that falls within one of the four categories of conduct set forth in 425.16(e). If the defendant meets his initial burden, then the burden shifts to the plaintiff to establish a probability that the plaintiff will prevail on the claim—i.e., present facts which would, if proved at trial, support a judgment in the plaintiff’s favor. (Id. at 15051.)

In making its determination of the anti-SLAPP motion, 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(b)(2).) However, the court does not “weigh credibility [nor] compare the weight of the evidence. Rather, [the court] accepts as true the evidence favorable to the plaintiff and evaluates the defendant’s evidence only to determine if it has defeated that submitted by the plaintiff as a matter of law.” (Flatley v. Mauro (2006) 39 Cal.4th 299, 326.)

A. Protected Activity

Moving parties have the initial burden to demonstrate that a cause of action is subject to a special motion to strike. (Martinez v. Metabolife Inter. Ins. (2003) 113 Cal.App.4th 181, 186; Fox Searchlight Pictures Inc. v. Paladino (2001) 89 Cal.App.4th 294, 304.) Specifically, courts decide whether moving parties have made a prima facie showing that the attacked claims arise from a protected activity, including defendants’ right of petition, or free speech, under the Constitution, in connection with issues of public interest. (Healy v. Tuscany Hills Landscape & Recreation Corp. (2006) 137 Cal.App.4th 1, 5; Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 278; Paulus v. Bob Lynch Ford, Inc. (2006) 139 Cal.App.4th 659, 671; Equilon Ent. v. Consumer Cause (2002) 29 Cal.4th 53, 67; Gov. Gray Davis Committee v. Amer. Taxpayers Alliance (2002) 102 Cal.App.4th 449, 458-59; CCP §425.16(e).) Moving parties can satisfy their burden by showing (1) statements made before legislative, executive or judicial proceedings, or made in connection with matters being considered in such proceedings, or (2) statements made in a public forum, or other conduct in furtherance of the exercise of the constitutional rights of petition or free speech, in connection with issues of public interest. (CCP §425.16(e); Equilon Ent., LLC v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 66.)

Here, Defendants argue that three forms of protected speech constitute the gravamen of Plaintiffs’ Complaint: (1) petitioning activity to government and enforcement authorities such as the LAPD, LA Code Enforcement, and LA City Attorney’s Office; (2) Communications made within and/or in connection with Plaintiffs’ 2019 Bankruptcy case and related litigation; and (3) communications of public concern regarding the operation of the world-famous Exchange LA Nightclub.

1. Protected Petitioning of Government Enforcement Authorities and Litigation

First, Defendants argue that the allegations contained in the Complaint regarding Defendants’ reporting of Plaintiffs’ failure to comply with the CUB requirements and related regulations constitute “communications that are preparatory to or in anticipation of commencing official proceedings.” (Siam v. Kizilbash (2005) 130 Cal.App.4^th 1563, 1570.) Additionally, Defendants contend that Plaintiffs’ repeated reliance on Defendants’ allegedly false statements in bankruptcy court constitute protected statements and other filings made during litigation in a judicial proceeding. (See, e.g. Lennar Homes of California, Inc. v. Stephens (2014) 232 Cal.App.4^th 673, 680-82.)

Defendants argue that these allegations are the gravamen of Plaintiffs’ Second and Third Causes of Action. Indeed, Plaintiffs rely heavily on statements made to regulatory authorities and in bankruptcy proceedings when alleging their first three causes of action. (See Compl. ¶¶ 66(d-f), 71(c-e).)

In Opposition, Plaintiffs contend that the First Cause of Action for Breach of Contact, Second Cause of Action for Implied Covenant of Good Faith and Fair Dealing, and Third Cause of Action for Breach of Implied Covenant of Quiet Enjoyment are supported by myriad allegations that exist independent of expressive conduct. Plaintiffs argue that Defendants have selected specific allegations that fall within protected speech, while ignoring the gravamen of the Complaint as to these causes of action. Plaintiffs contend that, though Defendants’ statements in bankruptcy court and to regulatory officials are evidence of Defendants’ intent to breach the lease, they do not form the basis for the causes of action in question.

“A claim arises from protected activity when that activity underlies or forms the basis for the claim.” (Park v. Board of Trustees of California State University (2017) 2 Cal.5th 1057, 1062.) “‘[T] defendant’s act underlying the plaintiff’s cause of action must itself have been an act in furtherance of the right of petition or free speech.’” (Id. at 1063 (quoting City of Cotati v. Cashman (2002) 29 Cal.4th 69, 78) (emphasis in original).) “‘[T]he mere fact that an action was filed after protected activity took place does not mean the action arose from that activity for the purposes of the anti-SLAPP statute.’” (Id. (quoting Navellier v. Sletten (2002) 29 Cal.4th 82, 89) (alteration in original).) “Instead, the focus is on determining what ‘the defendant’s activity [is] that gives rise to his or her asserted liability—and whether that activity constitutes protected speech or petitioning.’” (Id. (quoting Navellier, supra, 29 Cal.4th at 92) (alteration in original).) “‘The only means specified in section 425.16 by which a moving defendant can satisfy that [‘arising from’] requirement is to demonstrate that the defendant’s conduct by which plaintiff claims to have been injured falls within one of the four categories described in subdivision (e) . . . .’” (Id. (quoting Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 66) (emphasis in original).) “In short, in ruling on an anti-SLAPP motion, courts should consider the elements of the challenged claim and what actions by defendant supply those elements and consequently form the basis for liability.” (Id.)

In the present case, although the allegations levied against Defendants certainly include protected activity, these protected statements are merely evidence of Defendants’ intent to breach the lease and expel Plaintiffs from the Subject Property rather than Defendants’ conduct by which plaintiff claims to have been injured.

For example, the First Cause of Action for Breach of Contract alleges that Defendants breached the lease by: being delinquent on real property taxes; interfering with Plaintiffs’ use and enjoyment of the Premises; failing to properly maintain and repair the Premises; failing to secure the requisite occupancy certificate required of it from the Lease and applicable laws; and seeking to prevent a renewed or new CUB. (Compl. ¶¶ 60(a-e).)

While Defendants’ statements in the bankruptcy proceedings might provide evidence for these allegations, the allegations themselves are non-expressive conduct directly alleging a breach of the lease.

Similarly, for the Second Cause of Action for Breach of Implied Covenant of Good Faith and Fair Dealing, Plaintiffs allege, among other allegations, that Defendants “manufactur[ed] Lease defaults for the sole purpose of terminating the Plaintiffs rights under the Lease and Sublease.” (Compl. ¶ 66(b).) While the statements regarding lease defaults made in bankruptcy proceedings provide evidence of this allegation, the allegation is independent of those statements and is not a protected activity.

Accordingly, as Plaintiffs’ first three causes of action rely on non-expressive conduct, and as the protected activity on which Defendants accuse Plaintiff of relying are merely evidence of these allegations, Defendants do not meet their burden of showing the attacked claim relies on protected activity.

Defendants’ Motion to Strike the First, Second, and Third Causes of Action is DENIED.

2. Statements Made in a Public Forum

Next, Defendants argue that the allegations supporting Plaintiffs’ Fourth, Fifth, and Sixth Causes of Action for Negligent Interference with Prospective Economic Advantage, Intentional Interference with Prospective Economic Advantage, and Intentional Interference with Contractual Relations, respectively, are protected as speech “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.” (CCP § 425.16(e)(4).)

“In general, ‘[a] public issue is implicated if the subject of the statement or activity underlying the claim (1) was a person or entity in the public eye; (2) could affect large numbers of people beyond the direct participants; or (3) involved a topic of widespread, public interest.’” (D.C. v. R.R. (2010) 182 Cal.App.4th 1190, 1215 (quoting Jewett v. Capital One Bank (2003) 113 Cal.App.4th 805, 814).)

Here, Defendants allege that issues pertaining to Plaintiffs’ operation of the night club are an issue of public concern, as the club, as the Complaint acknowledges, has been ranked the second best club in the United States and a top ten club in the world. (Compl. ¶ 31.) Additionally, Defendants contend that the Exchange LA operations are a matter of public interest, as a number of complaints related to its operations have been levied by the public. (Kim Decl. Ex. 7.)

In Opposition, Plaintiffs contend, again, that the communications between Defendants and Plaintiffs’ business partners do not form the gravamen of the subject causes of action. This time, their argument is unavailing.

Upon review of the Complaint, the entirety of the allegations supporting the Fourth, Fifth, and Sixth causes of action are Defendants’ alleged erroneous communication with Plaintiffs’ business partners, which Plaintiffs allege Defendants undertook to interfere with Plaintiffs’ business relations. Unlike the first three causes of action, where the protected communications are evidence of Defendants’ breach of contract, for the Fourth through Sixth causes of action, Defendants’ protected communications constitute Plaintiffs’ alleged attempt to interfere with Plaintiffs’ business relations.

Accordingly, Defendants have met their initial burden of showing that the Fourth, Fifth, and Sixth causes of action arise from protected activity. The burden now shifts to Plaintiffs to show the probability of success on the merits.

B. PROBABILITY OF SUCCESS ON THE MERITS

Once a defendant has established that the anti-SLAPP statute applies, the burden shifts to the plaintiff to demonstrate a “probability” of success on the merits. (Code Civ. Proc., §425.16(b); Equilon Enters. LLC v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67.) “[T]he 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.” (Matson v. Dvorak (1995) 40 Cal.App.4th 539, 548 [internal quotations omitted].) The evidentiary showing by the plaintiff must be made by competent and admissible evidence. (Morrow v. Los Angeles Unified Sch. Dist. (2007) 149 Cal.App.4th 1424, 1444; see also Evans v. Unkow (1995) 38 Cal.App.4th 1490, 1497-98 (proof cannot be made by declaration based on information and belief); Tuchscher Dev. Enters., Inc. v. San Diego Unified Port Dist. (2003) 106 Cal.App.4th 1219, 1236-38 (documents submitted without proper foundation could not be considered in determining plaintiff’s probability of prevailing on its claim).)

Plaintiffs’ Fourth and Fifth Causes of Action are for Negligent and Intentional Interference with Prospective Economic Advantage, respectively.

The elements for the tort of negligent interference with prospective economic advantage are: “(1) an economic relationship existed between the plaintiff and a third party which contained a reasonably probable future economic benefit or advantage to plaintiff; (2) the defendant knew of the existence of the relationship and was aware or should have been aware that if it did not act with due care its actions would interfere with this relationship and cause plaintiff to lose in whole or in part the probable future economic benefit or advantage of the relationship; (3) the defendant was negligent; and (4) such negligence caused damage to plaintiff in that the relationship was actually interfered with or disrupted and plaintiff lost in whole or in part the economic benefits or advantage reasonably expected from the relationship.” (Venhaus v. Shultz (2007) 155 Cal.App.4th 1072, 1078.)

The elements of the tort of intentional interference with prospective economic relationship (IIPER) include the following: (1) an economic relationship between the plaintiff and some third party, with the probability of future economic benefit to the plaintiff; (2) the defendant's knowledge of the relationship; (3) intentional acts by the defendant designed to disrupt the relationship; (4) actual disruption of the relationship; (5) economic harm to the plaintiff proximately caused by the acts of the defendant; and, (6) conduct that was wrongful by some legal measure other than the fact of interference itself. (Youst v. Longo (1987) 43 Cal.3d 64, 71.)

Plaintiffs’ Sixth Cause of Action is for Intentional Interference with Contractual Relations.

The elements for the tort of intentional interference with the performance of a contract are: “(1) a valid contract between plaintiff and another party; (2) defendant’s knowledge of the 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.” (Asahi Kasei Pharma Corporation v. Actelion Ltd. (2013) 222 Cal.App.4th 945, 958.)

In their Supplemental Opposition, Plaintiffs substantiate their Fourth, Fifth, and Sixth Causes of Action with the Declaration of Adi McAbian, a managing member of Plaintiff Hawkeye Entertainment, LLC. (McAbian Decl., ¶ 1.) McAbian attests that Defendants contended that the use of Plaintiffs’ event space by a key customer, Fearless LA Church (the “Church”) violated both the CUB permit and the sublease. (Id. ¶ 29.) Additionally, McAbian attests that Defendants contacted the Church and told them that their relationship with Hawkeye was in violation of its lease. (Ibid.) McAbian contends that both claims were wrong, and that the Bankruptcy Court later confirmed this. (Ibid.) Nonetheless, Plaintiffs were forced to terminate their relationship with the Church so as to avoid default in their lease. (Ibid.)

The Court finds that Plaintiffs’ have presented sufficient admissible evidence demonstrating a probability of success on the Fourth, Fifth, and Sixth Causes of Action. Accordingly, Defendants’ Motion to Strike these causes of action is DENIED.

Defendants’ Anti-SLAPP Motion to Strike is DENIED.

DATED: February 21, 2023

___________________________

Hon. Robert S. Draper

Judge of the Superior Court