Brown v. Technology Properties

 

 

 

 

 

 

 

 

Filed 7/1/13  Brown v. Technology Properties CA6

 

 

 

 

 

 

>NOT TO BE PUBLISHED IN OFFICIAL REPORTS

> 

 

California
Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or
relying on opinions not certified for publication or ordered published, except
as specified by rule 8.1115(b).  This
opinion has not been certified for publication or ordered published for
purposes of rule 8.1115.

 

 

 

IN
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

 

SIXTH
APPELLATE DISTRICT

 

 
>

CHESTER A. BROWN, JR., et al.,   Plaintiffs, Cross-Defendants, and Respondents,   v.   TECHNOLOGY PROPERTIES LIMITED, LLC, et al.,   Defendants, Cross-Complainants and Appellants.

H037664      (Santa Clara County       Super. Ct. No. 1-09-CV-159452)

 

            Technology
Properties Limited, LLC (TPL) and its principal, Daniel Leckrone, appeal from
an order striking two causes of action in their cross-complaint against
plaintiffs Chester and Marcie
Brown.  Defendants contend that the
superior court improperly applied Code of Civil Procedure section 425.16href="#_ftn1" name="_ftnref1" title="">[1] in striking these
claims because they did not fall within the statutory description of a
"strategic lawsuit against public participation" (SLAPP).  We find no error and must therefore affirm
the order.

Background

            Defendant
Leckrone, an attorney, founded TPL and was its chairman.  Chester A. Brown, Jr. (Brown) was at various
times a consultant to and an employee of TPL, as well as an investor of patent
portfolios of which TPL had the right to commercialize.  In 1999 Leckrone was seeking funding for the
commercialization of a portfolio of "Hearing Health Care" (HHC)
patents.  Brown and his wife, Marcie
Brown, invested $50,000 in the HHC portfolio, in exchange for one percent of
the gross proceeds of any licensing of the portfolio.  Plaintiffs invested another $50,000 in 2000
and again in 2001.  In May 2003 Brown
became a consultant to TPL under a Consulting Agreement, under which he served
as Chief Operating Officer of Leckrone's newly formed entity, AsyncArray
Devices (AAD), in order to develop and commercialize a new microprocessor
device, which later became known as the SEAforth microprocessor.  Eventually the name of AAD was changed to
IntellaSys Corporation.  In 2006 Brown
became an IntellaSys employee, serving as Chief Executive Officer (CEO).  In September of 2006 IntellaSys was merged
into TPL, but Brown continued to serve as CEO of the IntellaSys division. 

            In August
2003 plaintiffs agreed to contribute another $25,000 for the HHC
portfolio.  This time the consideration
was 3.5 percent of the gross proceeds of the licensing of both the HHC
portfolio and another portfolio, consisting of Moore Microprocessor Patents
(MMP) based on technology developed by Charles Moore and Russell Fish.  Leckrone drafted the resulting contract, the
Assignment Agreement, which TPL and both plaintiffs executed in early 2004, but
which was backdated to August 4, 2003. 

            Plaintiffs
received payments from TPL under the Assignment Agreement covering the period
through March 2007.  After June 2007,
however, they received nothing.  When
Brown inquired about the failure to make further payments, Leckrone and TPL's
senior vice-president told him that TPL had no money. 

            Plaintiffs
filed a complaint against TPL and Leckrone in December 2009, alleging, among
other things, breach of the Assignment Agreement.  On March 1, 2010, defendants answered and
filed a cross-complaint.  Among the
causes of action in the cross-complaint was specific performance of a separate
contract on January 15, 2009.  Defendants
alleged that the SEAforth technology was to be transferred to a new company,
Newco, which Brown and other IntellaSys employees would control and in which
TPL would have a minority position. 
Brown had allegedly prepared a letter of intent which was accepted by
TPL and was incorporated into a "Master Agreement."  Under this contract, Brown was to have
"an interest in Newco in exchange for any sums owed to [>sic] per the Assignment."  TPL had performed its promises, but Brown had
not complied with his obligations, "including the cancellation of the
Assignment." 

            A bench
trial took place in November 2010, limited to (1) the interpretation of section
2.1 of the Assignment Agreement, and in particular the term "Gross
Proceeds" in that provision; and (2) the ability of TPL to modify or amend
the Assignment Agreement without a writing. 
On the latter issue, the court determined in July 2011 that amendment
was not precluded by a provision of the agreement restricting assignment. 

            Meanwhile,
on June 15, 2011, the court granted TPL leave to file a first amended
cross-complaint.  This pleading asserted
multiple causes of action, including breach of contract.  TPL alleged that Brown himself had proposed a
"Management Buyout" in which he would acquire the SEAforth Division
of IntellaSys in consideration for TPL's minority equity interest, "as
well as a release of certain claims, including specifically any claims the
Browns had under the parties' Assignment Agreement entitling the Browns to a
percentage interest in certain licensing proceeds from the MMP patent portfolio
referred to at that time as their 'TPL accrual.' "  The transaction was finalized, according to
the cross-complaint, on January 15, 2009, when TPL delivered the personnel and
assets of the SEAforth Division to Brown. 
TPL then "continued to fully and faithfully discharge its
obligations" by passing sales leads on to Brown, and maintaining
telephone, email, and website access and support.  In December 2009, however, "the Browns
announced their intention to renounce, abandon, and breach their obligations
under the agreement by filing a lawsuit against TPL to enforce the claims under
the parties' Assignment Agreement that they had relinquished in consideration
of TPL's acceptance of their Management Buyout proposal and by announcing Mr.
Brown's intention to limit his involvement in the management of the going
concern." 

            The cause
of action for breach of contract narrowed the focus of Brown's alleged
failings.  TPL stated that the parties
had an "oral agreement which was reduced to writing," in which Brown
agreed to act as CEO of the "going concern" and to "relinquish,
individually and  . . . on behalf of his wife, Marci[e] Brown,
any amount they were owed by TPL, if any." 
The key allegation of the first cause of action is the assertion of
breach:  "Despite agreeing to and
accepting the benefits of the Management Buyout agreement, the Browns
subsequently repudiated the agreement by filing this lawsuit to recover monies
from TPL that the Browns had agreed to relinquish as part of the agreement,
their so-called 'TPL accrual.' " 


            Similarly,
the sixth cause of action alleged promissory estoppel arising from Brown's
promise that he would act as CEO and that both he and Marcie would
"relinquish any amount they were owed by TPL, if any."  In "reasonable reliance" on this
promise, TPL gave up other marketing opportunities and "promptly turned
over control of the SEAforth Division of IntellaSys and all of its operational
assets to Mr. Brown and over the following weeks and months provided Mr. Brown
and his team with sales leads and other support," including proprietary
information.  The key allegation in this
cause of action was the following: 
"Despite TPL's performance, by filing their lawsuit against TPL to
recover amounts that they represented and promised they had relinquished any
claim to, the Browns have failed to honor and fulfill their promises to TPL and
injustice can only be avoided by enforcing the Browns' promises and
representations to TPL." 

            The
remaining allegations of the first amended cross-complaint were for href="http://www.fearnotlaw.com/">intentional and negligent misrepresentation,
intentional and negligent interference with the economic relationship
between TPL and Moore, misappropriation of trade secrets, unfair competition,
and conversion.  These claims were
premised on the alternative contingency that no agreement was actually reached
in January 2009.  Instead, Brown was
alleged to have misrepresented his intention to enter into such a relationship;
and by failing to honor his promises, he disrupted TPL's negotiations with
Moore and other third parties.  Finally,
TPL sought declaratory relief to determine the rights and obligations of the
parties with respect to the Management Buyout, particularly the Browns'
liability to TPL. 

            Plaintiffs
answered the first amended cross-complaint and then filed a motion to strike
each cause of action under section 425.16, the anti-SLAPP statute.  Plaintiffs argued that the entire
cross-action arose from the plaintiffs' protected right to petition, because
defendants were alleging repudiation of a contract by plaintiffs' filing of
their lawsuit.  They further disputed
defendants' ability to prevail on their claims. 
In opposition, defendants insisted that their complaint arose from the
conduct of the parties in January 2009, not from plaintiffs' December 2009
complaint. 

            On
September 27, 2011, following written and oral argument, the superior court
issued its order granting the motion in part. 
The court agreed with plaintiffs that the first (breach of contract) and
sixth (promissory estoppel) causes of action arose out of protected activity
and that defendants had failed to demonstrate a probability of prevailing.  As to the remaining claims, the court denied
the motion.  Defendants filed this timely
appeal.href="#_ftn2" name="_ftnref2" title="">[2]

Discussion

1.  Scope and Standard of Review

            Both
parties appear to understand the nature of section 425.16 and the legislative
intent underlying its enactment.  "A
SLAPP is a civil lawsuit that is aimed at preventing citizens from exercising
their political rights or punishing those who have done so. ' "While
SLAPP suits masquerade as ordinary lawsuits such as defamation and interference
with prospective economic advantage, they are generally meritless suits brought
primarily to chill the exercise of free speech or petition rights by the threat
of severe economic sanctions against the defendant, and not to vindicate a
legally cognizable right." ' "  (Simpson
Strong-Tie Company, Inc. v. Gore (2010) 49 Cal.4th 12, 21; >Briggs v. Eden Council for Hope &
Opportunity (1999) 19 Cal.4th 1106, 1126.) 
Section 425.16 was enacted in 1992 to address the "disturbing
increase" in the frequency of these meritless harassing lawsuits.  (§ 425.16, subd. (a); see >Navellier v. Sletten (2002) 29 Cal.4th
82, 85, fn. 1; Simpson Strong-Tie
Company, Inc. v. Gore, supra, 49 Cal.4th at p. 21.)  It was the Legislature's finding "that
it is in the public interest to encourage continued participation in matters of
public significance, and that this participation should not be chilled through
abuse of the judicial process.  To this
end, this section shall be construed broadly."  (§ 425.16, subd. (a).)  The statute was thus designed to deter
meritless actions that "deplete 'the defendant's energy' and drain 'his or
her resources,' [citation], . . .  '
". . . by ending them early and without great cost to the SLAPP
target" '  [citation]."  (Varian
Medical Systems, Inc. v. Delfino (2005) 35 Cal.4th 180, 192; >Soukup v. Law Offices of Herbert Hafif
(2006) 39 Cal.4th 260, 278; Chabak v.
Monroy (2007) 154 Cal.App.4th 1502.) 
The challenged cause of action may appear in a complaint, in a
cross-complaint, or in other pleadings. 
(§ 425.16, subd. (h); City of
Cotati v. Cashman (2002) 29 Cal.4th 69, 77 (Cotati).)

            In
evaluating a motion under the statute the trial court engages 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. (§ 425.16, subd. (b)(1).)  If the court finds such a showing has been
made, it then must consider whether the plaintiff has demonstrated a
probability of prevailing on the claim." 
(Cotati, supra, 29
Cal.4th at p. 76; Oasis West Realty, LLC
v. Goldman (2011) 51 Cal.4th 811, 819-820.) 
"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, supra, 29 Cal.4th at p. 89.)  We review an order granting or denying a
motion to strike under section 425.16 de novo. 
(Soukup v. Law Offices of Herbert
Hafif, supra, 39 Cal.4th at
p. 269, fn. 3; Oasis West Realty, LLC v.
Goldman, supra, 51 Cal.4th
at p. 820.)

2.  Protected Activity: Right of
Petition

            The first
step of the section 425.16 analysis is to determine whether the challenged
cause of action was one arising from protected activity.  It is the burden of the party seeking the
protection of the statute (the defendant, or, in this case, plaintiffs as
cross-defendants) to show that the challenged cause of action falls within the
statute.  (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53,
66 (Equilon); accord, >Jarrow Formulas, Inc. v. LaMarche (2003)
31 Cal.4th 728, 733.)  Accordingly, the
conduct at issue must fall within one of the four categories set forth in
subdivision (e) of section 425.16: 
"(1) any written or oral statement or writing made before a
legislative, executive, or judicial proceeding, or any other official
proceeding authorized by law; (2) any written or oral statement or writing made
in connection with an issue under consideration or review by a legislative,
executive, or judicial body, or any other official proceeding authorized by
law; (3) any written or oral statement or writing made in a place open to the
public or a public forum in connection with an issue of public interest; or (4)
any other conduct in furtherance of the exercise of the constitutional right of
petition or the constitutional right of free speech in connection with a public
issue or an issue of public interest." 
(§ 425.16, subd. (e).) 

            "As
courts applying the anti-SLAPP statute have recognized, the 'arising from'
requirement is not always easily met." 
(Equilon, supra, 29 Cal.4th at
p. 66.)  "[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.  [Citation.] 
Moreover, that a cause of action arguably may have been 'triggered' by
protected activity does not entail [sic]
that it is one arising from such. 
[Citation.]  In the anti-SLAPP
context, the critical consideration is whether the cause of action is based on
the defendant's protected free speech or petitioning activity."  (Navellier
v. Sletten, supra, 29 Cal.4th at p. 89; In
re Episcopal Church Cases (2009) 45 Cal.4th 467, 477.)  Moreover, "a defendant in an ordinary
private dispute cannot take advantage of the anti-SLAPP statute simply because
the complaint contains some references to speech or petitioning activity by the
defendant. . . . [W]hen the allegations referring to arguably protected
activity are only incidental to a cause of action based essentially on
nonprotected activity, collateral allusions to protected activity should not
subject the cause of action to the anti-SLAPP statute."  (Martinez
v. Metabolife Intern., Inc. (2003) 113 Cal.App.4th 181, 188.) 

            Defendants'
primary contention on appeal is that a compulsory cross-complaint such as
theirs cannot be subject to scrutiny as a potential SLAPP.  Even assuming, however, that their pleading
was in fact a compulsory cross-complaint,href="#_ftn3" name="_ftnref3" title="">[3] it was not
automatically exempt from the reach of the anti-SLAPP statute.  (See Raining
Data Corp. v. Barrenechea (2009) 175 Cal.App.4th 1363, 1373 [rejecting
assertion that compulsory cross-complaint can never be subject to an anti-SLAPP
motion].)  It is the "principal
thrust or gravamen" of the claim that determines whether section 425.16
applies. (Martinez v. Metabolife
Internat. Inc., supra, 113
Cal.App.4th at p. 188, citing Cotati,
supra, 29 Cal.4th at p. 79; >Navellier, supra, 29 Cal.4th at
pp. 92-93.)  Here, the gravamen of
defendants' allegations in the first and sixth causes of action was not that
plaintiffs simply failed to perform under the Management Buyout agreement, but
that they actively repudiated the
agreement and broke their promise specifically "by filing their lawsuit
against TPL" for breach of the earlier contract, the Assignment
Agreement.  The conduct alleged in the
cross-complaint thus arose from plaintiffs' act of filing their complaint, a
protected activity.  (Cf. >Navellier, supra, 29 Cal.4th at
p. 90 [complaint subject to section 425.16 where it alleged repudiation by
filing federal action, contrary to release of claims].)

            >Kajima Engineering & Construction, Inc.
v. City of Los Angeles (2002) 95 Cal.App.4th 921, 924–925 does not instruct
otherwise.  In that case the trial court
granted the plaintiff's anti-SLAPP motion as to one cause of action in the
defendant city's cross-complaint; in that cause of action the city had alleged
a violation of the False Claims Act, based on the filing of the plaintiff's
underlying complaint.  The striking of
that cause of action was not
challenged on appeal. As the remaining claims were not based on the plaintiff's
litigation activity, the motion was properly denied.  (Id.
at p. 930 & fn. 5.)  Clearly >Kajima has no application to this case.  Nor does Church
of Scientology v. Wollersheim (1996) 42 Cal.App.4th 628 (disapproved of on
another ground in Equilon, supra, 29
Cal.4th 53), cited in Kajima, support
defendants' position.  Wollersheim in
fact specifically noted that a cross-complaint may be subject to a section
425.16 motion, although "[o]nly those cross-complaints alleging a cause of
action arising from the plaintiff's
act of filing the complaint against the defendant and the subsequent litigation
would potentially qualify as a SLAPP action."  (42 Cal.App.4th at p. 651.) 

            Here, as
discussed above, the first and sixth causes of action in the cross-complaint
specifically identified plaintiffs' act of filing the lawsuit as the basis for
the alleged wrong.  Defendants
nevertheless recharacterize their allegations as complaining of conduct that
"began nearly a year before the Browns filed their lawsuit. "  According to defendants, the
"mention" of the lawsuit in the cross-complaint was
"incidental," as it only identified "the point at which the
Browns finally made absolutely clear 'their intention to renounce, abandon and
breach their obligations under the [January 2009 Management Buyout
Agreement].' "  Defendants,
however, have not pointed to a specific act by Brown or Marcie Brown that
constituted a breach of their promise before the filing of the lawsuit.  The "intention" itself was not
actionable; and whatever act constituted the actual renouncement had to have
occurred shortly after the agreement was reached in order to have been
"nearly a year before" the lawsuit. 
Defendants refer us to nothing in the record from which we can infer
that the first and sixth causes of action were based on conduct other than what
the pleading plainly stated:  that
plaintiffs failed to honor their promissory obligation "by filing their
lawsuit against TPL."  The superior
court therefore did not err in determining that plaintiffs met their initial
burden to show that these two claims arose from an act in furtherance of
plaintiffs' "right of petition" as defined in section 425.16,
subdivision (e).  Accordingly, we must
turn next to the second step of the SLAPP analysis: whether defendants met
their responsive burden to show a probability of prevailing on the stricken
causes of action.

3.  Probability of Prevailing

            To satisfy
the second prong of the SLAPP analysis, "a plaintiff responding to an
anti-SLAPP motion must " ' " 'state[ ] and
substantiate[ ] a legally sufficient claim.' "  [Citations.] 
Put another way, 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." ' 
[Citation.]  'We consider
"the pleadings, and supporting and opposing affidavits
 . . . upon which the liability or defense is based." (§
425.16, subd. (b)(2).)  However, we
neither "weigh credibility, [nor] compare the weight of the evidence.  Rather, [we] accept as true the evidence
favorable to the plaintiff [citation] and evaluate the defendant's evidence
only to determine if it has defeated that submitted by the plaintiff as a
matter of law." ' 
[Citation.]  If the plaintiff 'can
show a probability of prevailing on any part of its claim, the cause of action
is not meritless' and will not be stricken; 'once a plaintiff shows a
probability of prevailing on any part of its claim, the plaintiff >has established that its cause of action
has some merit and the entire cause of action stands.'  [Citation.]"  (Oasis
West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 820.)

            Here the
causes of action were for breach of contract and promissory estoppel.  Establishing the first cause of action would
have required a showing of "(1) the existence of the contract, (2)
plaintiff's performance or excuse for nonperformance, (3) defendant's breach,
and (4) the resulting damages to the plaintiff." (Id. at p. 821, citing Reichert
v. General Ins. Co. (1968) 68 Cal.2d 822, 830.)  Defendants contend that they submitted
evidence of both the January 2009 agreement and Brown's breach.  The evidence they point to, however,
established that no January 2009 contract ever existed.  Leckrone's own declaration referred to an
unsigned letter of intent and the bare statement that the buyout proposal had
been "reduced to writing."  Not
only did defendants produce no written agreement signed by both plaintiffs,
there was no evidence supporting even an inference of mutual assent.  Defendants suggest that an e-mail
correspondence evinces an agreement reached by January 15, 2009.  The correspondence proffered by the parties
instead reveals the opposite, that the parties had not agreed on the terms even
as late as May 2009.  Likewise, the
printed copy of a PowerPoint presentation by TPL on January 15, 2009
indicates nothing more than a meeting at which proposed details of the SEAforth
spinoff were discussed.  None of the
evidence indicates that the parties mutually assented to a term providing for
the relinquishment by both plaintiffs of their accrual rights under the prior
Assignment Agreement.  Leckrone himself
testified at his deposition that he did not believe that the rights and
obligations of the Assignment Agreement had been extinguished in any way.href="#_ftn4" name="_ftnref4" title="">[4]  And in early February he went to plaintiffs'
home and unsuccessfully tried to persuade them to agree to a draft of an
agreement between TPL, Brown, and Moore.href="#_ftn5" name="_ftnref5" title="">[5]  Moore himself did not sign such an agreement;
and by February 2009, independent of any conduct of Brown, he had discontinued
negotiations with TPL. 

            In short,
the trial court ruled correctly that there was no contract providing for
plaintiffs' relinquishment of their accrual rights under the Assignment
Agreement.  The lack of mutual assent,
however, does not foreclose a showing of promissory estoppel.  To succeed in that cause of action defendants
would have had to show a "clear and unambiguous" promise, reasonable
and foreseeable reliance by the party to whom the promise is made, and injury
resulting from that reliance.  (>US Ecology, Inc. v. State (2005) 129
Cal.App.4th 887, 901; accord, Joffe v.
City of Huntington Park (2011) 201 Cal.App.4th 492, 513; >Jolley v. Chase Home Finance, LLC (2013)
213 Cal.App.4th 872, 897.)  While this
cause of action lacks the contractual element of consideration, it nonetheless
involves a promise.  (See Douglas
E. Barnhart, Inc. v. CMC Fabricators, Inc. (2012) 211 Cal.App.4th 230,
247.)  As discussed above, however, there
was no evidence that either Chester or Marcie Brown promised to relinquish
their accrual rights under the Assignment Agreement.  Consequently, defendants necessarily failed
to show a probability of prevailing on this cause of action as well.

            We thus
conclude that the superior court properly struck the first and sixth causes of
action in defendants' first amended cross-complaint.  Plaintiffs met their burden to show that the
key allegations of these causes of action arose from plaintiffs' act of filing
their action against defendants, clearly an act in furtherance of their right
of petition within the meaning of section 425.16.  Having failed to show a probability of
prevailing, defendants were properly foreclosed from proceeding on these
claims.

Disposition

            The order
is affirmed.  Plaintiffs are entitled to
their costs on appeal.

 

 

 

 

                                                                        ______________________________

                                                                        ELIA,
J.

 

WE CONCUR:

 

 

 

 ______________________________

 RUSHING, P. J.

 

 

 

 ______________________________

 PREMO, J.