ReMetrix v. Ruch
Filed 7/9/12 ReMetrix v. Ruch CA1/1
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 This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115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
FIRST APPELLATE DISTRICT
DIVISION ONE
ReMetrix LLC,
Plaintiff and
Appellant,
v.
SCOTT A. RUCH et al.,
Defendants and
Appellants.
A130311
(Alameda County
Super. Ct. No. RG-10511868)
Defendants Scott A. Ruch and Ruch
Logic LLC appeal the trial court’s order denying their anti-SLAPP motion.
court’s order denying its request for attorney fees. We affirm both orders.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
On April 27, 2010, plaintiff filed a
complaint against defendants. The
complaint states nine causes of action for: (1) misappropriation of trade
secrets in violation of Civil Code section 3426 et seq., (2)
unfair competition, (4) intentional interference with prospective economic
advantage, (5) a second claim for breach of loyalty and fiduciary duty, (6)
unfair and unlawful competition in violation of Business and Professions Code
section 17200 et seq., (7) intentional interference with prospective economic
advantage, (8) conversion, and (9) accounting.
The complaint alleges that Ruch was
employed by plaintiff from November 2001 until his resignation on March 23,
2009. Plaintiff’s business involves
developing and preparing submerged habitat maps for waterways owned by or under
the jurisdiction of its clients to assist them in developing and improving the
herbicidal control of aquatic vegetation.
According to the complaint, plaintiff is “the leading national firm
focused on submerged vegetation mapping, bathymetry [water depth mapping] and
species quantification.†Over the span
of several years, plaintiff created a correction and adjustment process
referred to in the complaint as the “ReMetrix Processing Tool,†which corrects
for anomalies in data thereby rendering the measurements of plant height,
density, and cover substantially more accurate.
Plaintiff incorporated the ReMetrix Processing Tool, including all of
its unique and highly individualized algorithms, into a computer software
program called TideStar. The complaint
refers to these two products as the “Trade Secret.â€
Plaintiff claims the Trade Secret
has substantial value in that it allows plaintiff to provide its customers with
accurate maps that help them plan, calibrate and track the herbicidal treatment
of vegetation in a precise, refined, and efficient manner. Plaintiff has undertaken significant efforts
to protect and preserve the secrecy and confidentiality of the Trade Secret by
limiting access to certain personnel, maintaining a confidential pass code to
restrict computer access, requiring personnel to execute confidentiality
agreements, and reminding all personnel of the need to strictly maintain
confidentiality at all times.
The complaint alleges that plaintiff
had a seven-year business relationship with the California Department of
Boating and Waterway (DBW), consisting of plaintiff’s hydroacoustic mapping of
the Sacramento-San Joaquin Delta (Delta).
During this time, Ruch was employed by plaintiff, first as a technical
specialist and later as a project manager.
Ruch’s duties included (1) collecting hydroacoustic data, (2)
processing, correcting and refining such data, and (3) using software to
prepare accurate maps of such waterways.
Ruch was a trusted employee of plaintiff, and was therefore given access
to the Trade Secret in the performance of his job. He was at all times fully aware of the highly
sensitive and confidential nature of the Trade Secret as plaintiff’s
proprietary information, and agreed to maintain its confidentiality.
Contract
The complaint alleges that Ruch
subsequently formed his own company called Ruch Logic and resigned from
plaintiff immediately thereafter, taking the Trade Secret without plaintiff’s
knowledge or consent. He announced to
the DBW that he had formed his own company and actively solicited the DBW’s
business by representing his intent to use the Trade Secret should he be
awarded the mapping contract. On this
basis, his company was awarded a three-year contract with the DBW. He allegedly continues to use the Trade
Secret in the performance of this contract.
The complaint further states that up
through March 2009, the DBW had expressed a clear intention to award plaintiff
a new three-year contract following the expiration of the parties’ existing
contract. After this announcement, Ruch
telephoned a DBW officer and scheduled a clandestine follow-up meeting lasting
almost two hours. Ruch told the officer
of his intent to resign from plaintiff and form his own company, conveying
false and/or misleading information designed to create the false impression
that plaintiff had a conflict of interest such that it should not be awarded a
renewed contract. Ruch actively
solicited the contract for his own company, resigned from plaintiff after he
received assurances from the DBW that it would award him the new contract, and
sabotaged his company-issued computer by destroying confidential and
proprietary data.
The complaint alleges plaintiff has
suffered irreparable and continuing injury from defendants’ use of the Trade
Secret. Plaintiff prays for injunctive
relief, as well as compensatory and
punitive damages.
and Anti-SLAPP Motion
On June 22, 2010, plaintiff filed a
motion for a preliminary injunction.
Supporting the motion are declarations of key company technicians and
developers, as well as forensic experts.
On July 21, 2010, defendants filed a
motion to strike the complaint under the anti-SLAPP statute, Code of Civil
Procedure section 425.16.
name="_ftnref2" title="">[2] In an accompanying declaration filed by Ruch,
he reports that Ruch Logic LLC is wholly owned by him and has contracted with
the DBW “to monitor aquatic herbicide treatment efficacy on the exotic invasive
submersed plant Egeria densa and
mapping/monitoring associated native/non-native submersed vegetation
communities†in the Delta. He denies
plaintiff ever required him to sign a nondisclosure or a
Ruch states that an herbicide
manufacturer named SePRO became plaintiff’s sole owner in early 2005, after
which Ruch became “concerned about a conflict of interest with regard to the
DBW contract because I was monitoring the effectiveness of herbicides sold by
SePRO to the State of California.†That
year, at Ruch’s urging, plaintiff’s Commercial Manager Doug Henderson came to
California where they both met with the DBW and informed the agency about
SePRO’s ownership interest in plaintiff.
Ruch’s declaration also reports that
he met with a DBW representative on March 11, 2009 and told her he was “not
comfortable working for SePRO/ReMetrix on the herbicide monitoring program
because of the conflict of interest created by SePRO’s total ownership and
control of ReMetrix and SePRO’s associated attempts at controlling interest in
my data results and presentation.†He
offered to work as a consultant to the DBW while he went to graduate
school. Five days later, the DBW
announced it would not award another contract to plaintiff due to SePRO’s sole
ownership. Two days later, Ruch formed
Ruch Logic. He resigned from plaintiff
the following day. On March 27, 2009, he
submitted a proposal to the DBW for herbicide monitoring in the Delta. His company was awarded the contract on April
24, 2009.
On July 23, 2010, defendants filed
their opposition to plaintiff’s request for a preliminary injunction. Included in the opposition papers is a declaration
of Marcia Carlock, the manager of the Aquatic Weed Program at the DBW. In her declaration, she states that certain
environmental agencies had expressed concern about the fact that plaintiff is
wholly owned by SePRO. SePRO
manufactures the chemical Fluridone, which is the herbicide used in the
ReMetrix until March 1, 2009, as there were previously no other companies who
could perform the monitoring required by the contract.†With the formation of Ruch Logic, the DBW was
able for the first time to put the contract out for competitive bidding. Ruch’s company was awarded the contract
because he had more experience with the Delta than the employees of the other
bidders (including plaintiff, his former employer), and because his company had
no conflict of interest because it was not connected to SePRO.
In its opposition to the anti-SLAPP
motion, plaintiff included a declaration prepared by Henderson. Henderson states that plaintiff became fully
owned by SePRO in early February 2005.
On February 28, 2005, Ruch and Henderson met with Carlock and members of
her staff. Ruch and Henderson informed the
agency of the ownership change. This is
the same 2005 meeting Ruch mentions in his own declaration. According to Henderson, the DBW officers did
not seem concerned and subsequently awarded two contracts to plaintiff while
expressing satisfaction with the company’s performance. Meanwhile, Ruch became dissatisfied with the
compensation he was receiving from plaintiff.
Henderson also states that on March
10, 2009, Carlock sent an email indicating that no other organizations had
expressed interest in response to a DBW Request For Information (RFI) regarding
a new mapping contract, and that the DBW was ready to proceed with a
noncompetitive bid proposal in favor of plaintiff. Carlock indicated the DBW had “the
justification all set†but needed the actual scope of work and a budget page
for the contract. Because Ruch was the
project manager on the DBW project for plaintiff, he was aware that an RFI
would be sent out to determine whether there were any other qualified
interested companies.
On September 29, 2010, the trial
court filed its order denying defendants’ special motion to strike. The court found defendants had failed to meet
their initial burden to establish that the challenged causes of action arise
from acts taken in furtherance of the rights
of petition or free speech. Citing
v. City of Los Angeles (2002) 95 Cal.App.4th 921, 932 (Kajima), the court noted there was no evidence that the acts
complained of were part of any official proceeding or made in connection with
an issue under consideration by a government agency other than the renewal of
the DBW contract. The court further
found that even if Ruch’s comments about the plaintiff’s alleged conflict of
interest fell within the provision for speech made in connection with an issue
of public interest, it did not appear that any of plaintiff’s claims arose from
that conduct.
The trial court first noted the DBW
had been aware of the alleged conflict of interest for four years before Ruch brought it up in early 2009. Second, over those four years the DBW had
continued to contract with plaintiff in spite of this awareness. Third, it was not the communication of the
alleged conflict of interest, but the solicitation of the contract, formation
of a competing company, and the alleged misappropriation of trade secrets that
gave rise to plaintiff’s claims. And
finally, the cited communication is only incidental to these claims. In its order, the court also denied
plaintiff’s request for attorney fees, finding defendants’ motion was not
brought in bad faith, was not frivolous, and was not made solely with the
intent to cause unnecessary delay.
On this same day, the trial court
granted, in part, plaintiff’s motion for a preliminary injunction. The injunction prohibits defendants from
using, disclosing, disseminating, revealing, transmitting, or publishing the
Trade Secret.
DISCUSSION
Section 425.16, known as the
anti-SLAPP statute, provides: “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
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.â€
(§ 425.16, subd. (b)(1).) “The
phrase ‘arising from’ . . . has been interpreted to mean that ‘the
act underlying the plaintiff’s cause’ or ‘the act which forms the basis for the
plaintiff’s cause of action’ must have been an act in furtherance of the right
of petition or free speech.†(
93 Cal.App.4th 993, 1001 (ComputerXpress).) “The goal [of section 425.16] is to eliminate
meritless or retaliatory litigation at an early stage of the proceedings.†(Seelig
v. Infinity Broadcasting Corp. (2002) 97 Cal.App.4th 798, 806 (
Courts engage in a two-step process
in determining whether a cause of action is subject to a special motion to
strike under section 425.16. First, the
court determines if the challenged cause of action arises from
burden shifts to the plaintiff to establish, with admissible evidence, a
reasonable probability of prevailing on the merits. (Navellier
v. Sletten (2002) 29 Cal.4th 82, 88.)
“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.†(Id. at p. 89.)
A ruling on a section 425.16 motion
is reviewed de novo. (
Cal.App.4th 635, 645 (Thomas).) We review the record independently to
determine whether the asserted cause of action arises from activity protected
under the statute and, if so, whether the plaintiff has shown a probability of
prevailing on the merits. (
993, 999; Seelig, supra, 97
Cal.App.4th 798, 807.)
Before we consider whether the
conduct or speech at issue is protected by section 425.16, we will address
plaintiff’s contention that this case is excepted from the reach of the
anti-SLAPP statute under the commercial speech exemption provided in section
425.17, subdivision (c). The trial court
did not address this issue in its order.
Per section 425.17, the anti-SLAPP
statute does not apply to causes of action arising from specified claims
against business entities that involve commercial speech or conduct. Section 425.17 was adopted in 2003 to address
“a disturbing abuse of Section 425.16 . . . .†(§ 425.17, subd. (a).) Section 425.17 exempts certain lawsuits from
the ambit of the anti-SLAPP statute. As
such, “it raises a threshold issue, and we address it prior to examining the
applicability of section 425.16.†(
134 Cal.App.4th 834, 840.)
The commercial speech exemption set
forth in section 425.17, subdivision (c) provides, in relevant part: “Section
425.16 does not apply to any cause of action brought against a person primarily
engaged in the business of selling or leasing goods or services,
. . . arising from any statement or conduct by that person if both of
the following conditions exist: [¶] (1) The statement or conduct consists of
representations of fact about that person’s or a business competitor’s business
operations, goods, or services, that is made for the purpose of obtaining
approval for, promoting, or securing sales or leases of, or commercial
transactions in, the person’s goods or services . . . . [¶] (2) The
intended audience is an actual or potential buyer or customer, or a person
likely to repeat the statement to, or otherwise influence, an actual or
potential buyer or customer . . . .†The commercial speech exemption is a
statutory exception to section 425.16 and should be narrowly construed. (Simpson,
supra, 49 Cal.4th 12, 22.)
Plaintiff, as the party seeking the benefit of the commercial speech
exemption, bears the burden of proof as to its applicability. (Id.
at p. 26.)
Our Supreme Court has set forth a
four-part test in determining whether section 425.17, subdivision (c) operates
to exempt from the anti-SLAPP law a cause of action arising from commercial
speech. An action is exempt when: “(1)
the cause of action is against a person primarily engaged in the business of
selling or leasing goods or services; (2) the cause of action arises from a
statement or conduct by that person consisting of representations of fact about
that person’s or a business competitor’s business operations, goods, or
services; (3) the statement or conduct was made either for the purpose of
obtaining approval for, promoting, or securing sales or leases of, or
commercial transactions in, the person’s goods or services or in the course of
delivering the person’s goods or services; and (4) the intended audience for
the statement or conduct meets the definition set forth in section
425.17(c)(2).†(Simpson, supra, 49 Cal.4th 12, 30.)
We examine each prong of this test in turn.
Engaged in the Business of Selling Services
Defendants assert this first prong
is not satisfied because Ruch was not engaged in the sale of services at the
time he made the statements to the DBW regarding ReMetrix’s conflict of
interest. They focus solely on Ruch’s
alleged comment to DBW in March 2009 regarding SePRO’s ownership of ReMetrix,
which they claim was made before he attempted to solicit the contract. We note the test is not phrased as pertaining
solely to whether the defendant was in business at the time the relevant
communication was made. Instead, the
test is whether the cause of action in the complaint has been brought against a
person primarily engaged in the business of selling or leasing services or
goods. Here, there is no dispute that
defendants are engaged in the business of providing underwater vegetation
mapping services.
Regardless, as detailed above
plaintiff presented evidence showing that the DBW had all but promised it the
mapping contract on March 10, 2009. Ruch
met with the DBW the very next day to raise the issue of plaintiff’s supposed
conflict of interest, allegedly using this issue as leverage to position
himself as a superior vendor. His
strategy was successful five days later on March 16, 2009, when the DBW informed
plaintiff that the DBW intended to open the contract to a competitive bidding
process. Ruch immediately took steps to
form his own company and secured the contract.
Thus, even assuming this prong of the test requires a person to be
engaged in a business at the time the relevant communication is made, this
requirement is satisfied here as the timing of the events supports the
conclusion that the acts complained of were undertaken in furtherance of Ruch’s
business interests. Accordingly, this
prong of the test is satisfied.
from Statements Consisting of Representations of Fact about Plaintiff’s
Business Operations
In considering the second prong of
the commercial speech exemption, the Supreme Court in Simpson held the exemption did not apply to an attorney’s advertisement
containing allegedly defamatory statements about a galvanized screw
manufacturer’s products. (
advertisement that the screws were defective “ ‘is not “about†[the attorney’s]
or a competitor’s “business operations, goods, or services
. . . .â€
(§ 425.17(c)(1).) It is,
rather, a statement “about†[the manufacturer]—or, more precisely, [the
manufacturer’s] products.’ It therefore
falls squarely outside section 425.17(c)’s exemption for commercial
speech.†(Ibid.) To the extent the
advertisement included statements about the attorney’s own services, including
an offer to investigate potential claims, and (allegedly) an implication that
the attorney had discovered the alleged defect, these statements did not
trigger the commercial speech exemption, in part because the manufacturer’s
defamation claims did not arise from those statements; instead, the claims
arose from the attorney’s statements about the alleged defects in the
manufacturer’s products. (
As we will discuss further below,
the causes of action contained in the complaint do not arise primarily from
Ruch’s statements to the DBW about SePRO’s ownership of plaintiff. However, for purposes of this prong we focus
again on Ruch’s statements about the alleged conflict of interest. It is clear that his statements consisted of
representations of fact about plaintiff’s business operations, namely that
plaintiff is wholly owned by a company that manufactures herbicides, and that
this relationship created a conflict of interest in the context of the work
plaintiff performed for the DBW. This
second prong is thus satisfied.
the Purpose of Obtaining Approval for, Promoting, or Securing Sales of
Defendants’ Services
Defendants contend Ruch was acting
only as “a concerned scientist and whistle-blower who merely offered his
services to the DBW as a consultant while he attended school.†They assert the conflict of interest issue
was under review by the DBW, and claim that he acted “for more than the mere
purpose of obtaining sales of services for himself.†They cite to Sunset Millennium Associates, LLC v. LHO Grafton Hotel, L.P. (2006)
146 Cal.App.4th 300 (Sunset) for the
proposition that this prong is not satisfied because Ruch’s statements were
made to a public agency to address a public issue. Their reliance is misplaced.
In Sunset, the underlying complaint alleged that a hotel defendant’s
administrative objection to the approval of an environmental impact report
concerning the plaintiff’s hotel development project breached the parties’
agreements not to challenge any expansion of each other’s hotels. (146 Cal.App.4th 300, 302–303.) The appellate court found the first part of
section 426.17, subdivision (c) was satisfied in that the environmental
objections were statements of fact about a competitor’s business, but concluded
the exemption was inapplicable because “the statements made during the
administrative and litigation process were in an effort to forestall
environmental approval of plaintiff’s 2004 project; not for the purpose of
promoting defendant’s hotel ‘goods and services’ . . . .†(Sunset,
supra, at p. 313.)
Here, plaintiff sufficiently
demonstrated that Ruch’s communications were not about science or
whistle-blowing. There was no whistle to
blow, as it is undisputed that the relationship between plaintiff and SePRO was
disclosed to the DBW years before.
Instead, Ruch’s statements and conduct served to promote his own
business interests. Again, the sequence
of events is telling. On March 10, 2009,
Carlock told Henderson that the DBW was prepared to move forward with ReMetrix
on the new contract. On March 16, 2009,
she informed Henderson that the DBW had changed its mind and desired to move
forward with Ruch instead. Rather than
constituting comments undertaken in the interests of science and the
environment, we conclude Ruch’s comments were made for the sole purpose of
promoting his company’s services to the DBW.
an Actual or Potential Customer
We also have no difficulty in
concluding that Ruch’s audience was a potential customer. It is undisputed that the DBW contracted with
plaintiff for many years to provide the exact services that Ruch’s company has
provided to the DBW since replacing plaintiff in 2009. Defendants disingenuously assert the DBW was
not a potential customer of Ruch’s at the time of his statements “since Ruch
was merely a concerned scientist and whistle-blower.†To the contrary, the DBW clearly was a
potential customer at the time of the alleged statements. The rapid sequence of subsequent events amply
demonstrates the fallacy of defendants’ assertions.
Defendants further argue that the
commercial speech exemption applies only where the dispute is
Cal.App.4th 482. In Taheri, a lawsuit was brought by a law firm alleging that another
attorney improperly solicited its client.
The appellate court found the lawsuit was subject to the anti-SLAPP
statute, “as it arose out of the attorney’s communications concerning pending
litigation, and was not barred by the commercial speech exception to the
statute.†(Id. at p. 485.) While the
conduct could arguably have been viewed as falling within the scope of section
425.17, the appellate court concluded that “a cause of action arising from a
lawyer’s conduct, when the conduct includes advice to a prospective client on
pending litigation, does not fall within the statutory exemption to the
anti-SLAPP statute. Any other conclusion
would be inconsistent with the intent of the Legislature when it passed section
425.17, and would conflict with the client’s fundamental right of access to the
courts, which necessarily includes the right to be represented by the attorney
of his or her choice.†(
much more than “commercial speech†because it “was in essence advice by a
lawyer on a pending legal matter.†(
exemption to apply to actions arising from advice given by a lawyer on a
pending legal matter would “serve to thwart the client’s fundamental right
. . . to the lawyer of his choice.â€
(Ibid.)
The present case is distinguishable
from Taheri in that it does not
concern the attorney-client relationship or the
acting as a “concerned scientist and citizen speaking out regarding an
important public issue,†his own declaration reveals that the DBW knew about
the alleged conflict of interest for several years prior to his
“whistle-blowing petition activity.†The
relatively brief span of time between his alleged whistle-blowing and his
procurement of the contract with DBW suggests his altruistic motives were
negligible at best. Instead, the
evidence supports the conclusion that Ruch used the conflict of interest issue
as leverage to secure the DBW contract for himself.
Allegations Do Not Arise from Protected Activity
Even if the commercial speech
exemption does not apply, we agree with the trial court that the allegations in
the complaint do not implicate activity protected under section 416.25 because
even if Ruch engaged in protected conduct, that conduct itself is merely
incidental to plaintiff’s claims.
A. Ruch’s Conduct is Not Protected
Defendants contend that all of
plaintiff’s claims arise from protected petitioning activity. They first assert the complaint’s allegations
fall within section 425.16, subdivision (e)(1) and (2). Subdivision (e)(1) of section 425.16
provides, in relevant part, that the statute protects any “written or oral
statement or writing made before . . . [an] executive . . .
proceeding or any other official proceeding authorized by
law . . . .â€
Subdivision (e)(2) provides, in relevant part, that the statute protects
any “written or oral statement or writing made in connection with an issue
under consideration or review by . . . [an] executive . . .
body, or any official proceeding authorized by law . . . .†Defendants assert the complaint’s allegations
are subject to these two subdivisions because “they are based on alleged
statements to the government, and/or statements made in connection with matters
under review by the government.†We
agree with the trial court that this issue is controlled by
In Kajima, a construction company sued a city, claiming it was owed
payment for work on a reconstruction project.
(Kajima, supra, 95 Cal.App.4th
921, 924–925.) The city
cross-complained, alleging causes of action for breach of contract and breach
of the implied covenant of good faith and fair dealing. The construction company moved under section
425.16 to strike the amended cross-complaint as a SLAPP. The trial court ultimately struck only one
cause of action. (Id. at pp. 925–926.) The
appellate court affirmed, concluding the improper conduct alleged in the city’s
cross-complaint (including the allegation that the construction company
intentionally underbid the contract) did not arise from the company’s free
speech activities but rather from its bidding and contracting practices. (Id.
at p. 929.) Even the company admitted
that the majority of the alleged acts occurred when its initial bid was
submitted, and thus did not arise out of the filing of its complaint. (Id.
at p. 930.) Similarly, here the acts
complained of arise from defendants’ bidding and contracting practices, and not
from statements made in connection with an official proceeding.
We also reject defendants’ argument
that the complaint arises from “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)(4).) “The fact that conduct, when considered in
the abstract, may have particular public policy implications does not render it
‘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’ [citation].
The inquiry must focus on the content of the speech or other conduct on
which the cause of action is based, rather than generalities or
abstractions. [Citations.] Consistent with the purpose of the anti-SLAPP
statute ‘to encourage continued participation in matters of public
significance’ [citation], we believe that under clause (4), the
constitutionally protected free speech or petitioning activity must directly
contribute in some manner to the discussion of an issue of public interest or
seek to influence a discretionary decision by an official body relating to such
an issue.†(City of Industry v. City of Fillmore (2011) 198 Cal.App.4th 191,
217–218.)
In our view, the true public issue
is the proper management of the Delta’s waterways and the control of invasive
weeds, not the corporate ownership of the contractor who provides the DBW with
aquatic mapping services.
name="_ftnref4" title="">[4] We also note the factual basis for the
alleged conflict of interest is undisputed by plaintiff, who did not attempt to
conceal from the DBW the fact that it is wholly owned by SePRO. Nor has Ruch presented any evidence that the
alleged conflict of interest violated any laws or operated to compromise the
services plaintiff had provided to the DBW for many years. Essentially, the underlying dispute here
involves two private business entities who happen to provide services that are
likely to be rendered to public agencies.
That a public entity is involved does not, in and of itself, transform
this private dispute into a matter of public interest. Thus, it does not appear that Ruch’s comments
were made in connection with an issue of public interest.
Arise from Any Protected Activity
Even assuming that the circumstances
surrounding SePRO’s ownership of plaintiff is an issue of public interest, we
agree with plaintiff that the allegations of the complaint do not arise from
Ruch’s communication of that conflict of interest to the DBW.
When a lawsuit involves both
protected and unprotected activity, the court looks to the gravamen of the
claims to determine if the case is a SLAPP.
(Peregrine Funding, Inc. v.
Sheppard Mullin Richter & Hampton LLP (2005) 133 Cal.App.4th 658,
672.) Protected conduct which is merely
incidental to the claims does not fall within the ambit of section 425.16. (Martinez
v. Metabolife Internat., Inc. (2003) 113 Cal.App.4th 181, 188;
only be used as evidence in the plaintiff’s case, and none of the claims are
based on it, the protected activity is only incidental to the claims. (Wang
v. Wal-Mart Real Estate Business Trust (2007) 153 Cal.App.4th 790,
809–810.) Determining the gravamen of
the claims requires examination of the specific acts of alleged wrongdoing and
not just the form of the plaintiff’s causes of action. (Peregrine,
supra, at pp. 671–673.) In deciding
whether the “arising from†requirement is met, a court considers “the
pleadings, and supporting and opposing affidavits stating the facts upon which
the liability or defense is based.†(§
425.16, subd. (b).)
Significantly, Ruch’s statements
regarding the alleged conflict of interest are mentioned only a few times in
the complaint. The first reference
merely sets the context for the first breach of fiduciary duty claim.
into several of the remaining claims, but does not, in and of itself, form the
basis for any of the succeeding causes of action. Accordingly, the alleged conduct and
statements are merely incidental to plaintiff’s claims.
Because defendants have not met
their burden to show that the complaint is subject to the anti-SLAPP statute,
we need not consider whether plaintiff can demonstrate it is likely to succeed
on the merits.
Plaintiff has filed a cross-appeal
from the trial court’s denial of its request for attorney fees. “If the court finds that a special motion to
strike is frivolous or is solely intended to cause unnecessary delay, the court
shall award costs and reasonable attorney’s fees to a plaintiff prevailing on
the motion, pursuant to Section 128.5.â€
(§ 425.16, subd. (c)(1).)
The party seeking fees bears the burden of establishing entitlement to
those fees. (ComputerXpress, supra, 93 Cal.App.4th 993, 1020.) “A determination of frivolousness requires a
finding the motion is ‘totally and completely without merit’ [citation], that
is, ‘any reasonable attorney would agree such motion is totally devoid of
merit.’ [Citation.]†(Decker
v. U.D. Registry, Inc. (2003) 105 Cal.App.4th 1382, 1392, superseded by
statute on another point as noted in Hall
v. Time Warner, Inc. (2007) 153 Cal.App.4th 1337, 1348–1349.) If the court determines that the motion was
frivolous, an award of costs and fees is mandatory. (Moore
v. Shaw (2004) 116 Cal.App.4th 182, 199 (Moore).) We review the trial
court’s ruling for abuse of discretion.
(Decker, supra, at p.
1391.)
Preliminarily, we note defendants
contend the contested order is not cognizable on appeal. This argument is meritless.
November 22, 2010, 10 days after defendants filed their appeal. “In cases where, as here, the issue of
whether the anti-SLAPP motion should have been granted is properly before the
appellate court, it would be absurd to defer the issue of attorney fees until a
future date, resulting in the probable waste of judicial resources. When the first issue is properly raised,
appellate jurisdiction over both issues under section 425.16, subdivision (i)
is proper.†(Baharian-Mehr v. Smith (2010) 189 Cal.App.4th 265, 275 (
Abuse Its Discretion in Failing to Award Sanctions. Plaintiff contends
defendants’ anti-SLAPP motion was frivolous, made in bad faith, and intended
solely to cause delay. As such, it
claims the trial court abused its discretion in failing to award attorney
fees. Plaintiff asserts defendants knew
at least a month before they filed their anti-SLAPP motion that it would likely
succeed on the merits of its complaint.
Plaintiff also states that it supplied defendants with “exhaustive and
comprehensive evidence†indicating that the anti-SLAPP law did not apply to any
claim in the complaint. It also contends
the trial court failed to exercise its discretion in determining whether
attorney fees were warranted because its ruling merely states: “The Court does
not find that this motion was brought in bad faith, frivolous, or solely
intended to cause unnecessary delay.â€
Our review of
relevant case law leads us to conclude the trial court here did not abuse its
discretion. In Moore, an attorney retained to perform estate planning services
drafted an agreement to terminate a trust.
As a result, trust assets were distributed to several persons. After regaining some of the trust property,
the trustee filed an action against the attorney based on breach of trust. The attorney’s anti-SLAPP motion was
denied. When attorney fees were not
awarded to the trustee, both parties sought review. On appeal, the court determined that section
425.16 did not apply because there was no showing that the document was drafted
in connection with pending or imminent litigation. Instead, the conduct was simply part of a
private transaction that was unconnected to any “public issue†or “issue of
public interest.†Because the motion was
frivolous, the trial court erred when it failed to award attorney fees to the
trustee: “Because [the attorney’s] underlying conduct clearly did not
constitute an act in furtherance of the right to petition or free speech in
connection with a public issue, as those terms are defined in section 425.16,
any reasonable attorney would agree that an anti-SLAPP motion did not lie under
these circumstances and that the instant motion was totally devoid of merit. Accordingly, an award to [the trustee] of
reasonable attorney fees was mandatory [citation], and the trial court lacked
discretion to deny [the trustee’s] request therefor.†(Moore,
supra, 116 Cal.App.4th 182, 200.)
In Baharian-Mehr, the appellate court held that the defendant’s anti-SLAPP
motion was properly denied because the complaint did not arise from any
protected activity, but instead arose from a private business dispute between
the parties. After finding accounting
irregularities, a business partner had sued another partner for mismanagement
and misuse of funds. One of the alleged
improper expenditures involved hiring attorneys and a private investigator in
connection with wage and hour litigation.
The court noted the gravamen of plaintiff’s complaint was not that the
defendant’s petitioning activities caused harm, but that his wasteful and
unnecessary spending on attorneys and an investigator did. (Baharian-Mehr,
supra, 189 Cal.App.4th 265, 273.)
The court agreed that a reasonable attorney should have been aware that
a business dispute involving incidental protected activity was not subject to
the anti-SLAPP statute. The court found
no abuse of discretion in the award of attorney fees to the plaintiff, agreeing
with the trial court that the defendant’s motion was frivolous. (Id.
at p. 275.)
While we agree defendants’ motion is
lacking in merit, we do not find the trial court’s ruling denying plaintiff
attorney fees amounts to an abuse of discretion. In particular, the present case is
distinguishable from Moore in that,
while the contracting parties are private, the matter does involve statements
made to an officer of a public entity.
The matter also bears a tangential relationship to an issue of public
interest, namely, the proper management of invasive vegetation in the
Delta. The fact that the motion
ultimately failed does not mean that it is frivolous as a
bad faith or with the intent to cause delay.
Moreover, unlike the appellate court in Baharian-Mehr, here we are being asked to reverse a lower court’s
decision and find an abuse of discretion.
This we decline to do. We also
see no reason to infer that the trial court did not fully consider this issue.
arguments, we conclude the court did not abuse its discretion in refusing to
award plaintiff its attorney fees.
name="_ftnref8" title="">[8]
DISPOSITION
The orders are affirmed.
__________________________________
Dondero, J.
We concur:
__________________________________
Marchiano, P. J.
__________________________________
Banke, J.
name="_ftn1" title="">
lawsuit against public participation.’
[Citation.]†(
(2010) 49 Cal.4th 12, 16, fn. 1 (Simpson).)
name="_ftn2" title="">[2] All further
statutory references are to the Code of Civil Procedure except as otherwise
indicated.
