Santa Clara County Correctional Peace Officers Assn. v. Abbate

Filed 2/25/08 Santa Clara County Correctional Peace Officers Assn. v. Abbate CA1/5

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

FIRST APPELLATE DISTRICT

DIVISION FIVE

Richard T. Abbate (Abbate) and Edward J. Meyers (Meyers) appeal from an order denying their anti-SLAPP special motion to strike the first amended complaint of respondent Santa Clara County Correctional Peace Officers Association. (Code Civ. Proc.,  425.16.)^[1] Among other things, appellants contend that their allegedly unauthorized use of the Associations funds is constitutionally protected activity.

We will affirm the order.

I. FACTS AND PROCEDURAL HISTORY

The Santa Clara County Correctional Peace Officers Association (Association) is a nonprofit mutual benefit corporation that acted as a union representing employees of the Santa Clara County Department of Correction. Abbate was elected president of the Association in 1992. By 1993, Meyers was its treasurer.

A. Abbates and Meyers Activities

Over the next several years, with Abbate as president and Meyers as treasurer, the Association engaged in efforts to obtain independent bargaining authority and law enforcement powers for correctional officers. These efforts included lobbying, public relations campaigns, and litigation such as County of Santa Clara v. Deputy Sheriffs Assn. (1992) 3 Cal.4th 873, People ex rel Deputy Sheriffs Assn v. County of Santa Clara (1996) 49 Cal.App.4th 1471, and Abbate v. County of Santa Clara (2001) 91 Cal.App.4th 1231. Appellants contend they used the Association treasury to mount four legislative attempts to gain law enforcement powers for Association members, resulting ultimately in the 1999 passage of Senate Bill No. 1019, which amended Penal Code Section 831.5, subdivision (g) to grant certain authority to Santa Clara County correctional officers. (See Stats. 1999, chs. 83, 635,  2.) Abbates last term as president of the Association concluded in 2001.

B. New Administration and Financial Investigation

In 2003, Abbate ran again for Association president and was defeated by Everett Fitzgerald (Fitzgerald). Abbate and others sued to void the election and obtained a preliminary injunction prohibiting Fitzgerald from performing his duties. This injunction remained in effect until April 2004.

After taking office, Fitzgerald noticed possible irregularities in the Associations financial records and an unusually large number of checks issued to Abbate and Meyers. He appointed a committee to investigate. Upon reviewing the Associations records from 1994 through 2004, the committee discovered that appellants had paid to themselves substantial sums in violation of the Associations bylaws or without proper documentation.

In particular, based upon a review of Association bank records, general ledger, and other financial reports, as well as the expense report files for Association officers and directors and the minutes of the meetings of the board of directors and the membership, the committee determined that: appellants failed to provide complete expense reports to justify the amounts paid to them for reimbursement of expenses; appellants paid to themselves substantial amounts described as release time, which had not been authorized; at least 25 checks totaling approximately $65,000 had been issued to Meyers and bore the signature of Meyers or Abbate only, in violation of the Association bylaw requiring two signatures; credit card payments had been made on appellants behalf without documentation; and appellants paid themselves amounts in excess of budgeted and approved stipends and reimbursement.

Meyers was removed from office in 2005.

C. Association Lawsuit Against Abbate and Meyers

The Association filed a complaint against appellants in October 2006 for fraud/conversion, breach of fiduciary duty, and an accounting, seeking to recoup the amounts allegedly taken from the Association.

In December 2006, appellants filed a special motion to strike the complaint under the anti-SLAPP provisions of Code of Civil Procedure section 425.16. Appellants contended that the Associations causes of action arose from appellants union activity and that the challenged expenditures had been reported in the Associations records.

In January 2007, the Associations FIRST AMENDED COMPLAINT FOR MONEY added common counts to the causes of action previously asserted. Like the original complaint, the first amended complaint essentially sought compensation for the amounts appellants purportedly took from the Association without authorization. The first cause of action for fraud/conversion alleged: During the period between 1994 and 2004, [appellants], while acting in their capacities as President and Treasurer of [the Association], took monies from [the Associations] bank account(s) and/or improperly made payments on [appellants] personal credit cards with [the Associations] funds, and converted said funds to their own use. [The Association] is unaware of the exact amounts converted, but believes that the amounts converted on behalf of [appellant Abbate] exceeded $544,000, and the amounts converted on behalf of [appellant] Meyers exceeded $486,000. The first cause of action further alleged: Prior to the commencement of this action, [the Association] made demand upon the [appellants] for an accounting and for repayment of any amounts taken, but [appellants] have failed and refused to return any portion of said funds or to account for the payments made to them from [the Associations] funds.

The remaining causes of action sought similar relief under other legal theories. In their second cause of action, the Association alleged that appellants conduct constituted a breach of their fiduciary duties. The third cause of action sought an accounting, based largely on the following: [The Association] is informed and believes and on that basis alleges that [appellants] made disbursements to themselves and to each other from [the Associations] funds far in excess of any amounts that may have been actually owing or due to [appellants]. [The Association] further is informed and believes and on that basis alleges that [appellants] failed to obtain authorization for any such disbursements from the [Association] Board of Directors, that [appellants] did not fully inform the [Association] Board of Directors of the nature and extent of the alleged expenses for which they sought payment, and that monies are due and owing to [the Association] by [appellants]. The fourth and fifth causes of action asserted common counts against appellants based on allegations akin to those asserted elsewhere in the first amended complaint.

The Association also opposed appellants anti-SLAPP motion to strike, which was apparently deemed to be asserted against the first amended complaint as well as the original complaint. Accompanying the Associations memorandum of points and authorities were declarations from Fitzgerald and two members of the committee that had investigated the financial irregularities, Antonio Richardson and Timothy Davis. These declarations detailed the committees findings (summarized ante) and attached copies of the subject checks and expense reports as exhibits. Abbate and Meyers filed reply papers in support of the motion to strike. After a hearing, the trial court denied the motion.

Appellants filed a notice of appeal from the order denying their special motion to strike.^[2]

II. DISCUSSION

Section 425.16 authorizes a defendant to file a special motion to strike any cause of action that the plaintiff brought primarily to chill the exercise of the defendants constitutional rights of free speech and petition.^[3] It establishes a procedure by which the trial court evaluates the merits of the lawsuit using a summary-judgment-like procedure at an early stage of the litigation. (Flatley v. Mauro (2006) 39 Cal.4th 299, 312 (Flatley); Varian Medical Systems, Inc. v. Delfino (2005) 35 Cal.4th 180, 192 (Varian).)

In its motion, the defendant must make a prima facie showing that the plaintiffs cause of action arises from the defendants free speech or petition activity. The burden then shifts to the plaintiff to establish a probability of prevailing on the claim. (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67 (Equilon).) If the plaintiff fails to do so, the motion to strike is granted and the prevailing defendant is entitled to recover his or her attorney fees and costs. ( 425.16, subd. (c).)

In opposing the anti-SLAPP motion, the Association was required both to plead a legally sufficient cause of action and to make a prima facie showing of facts by admissible evidence sufficient to sustain a favorable judgment. (Equilon, supra, 29 Cal.4th at p. 67; Paulus v. Bob Lynch Ford, Inc. (2006) 139 Cal.App.4th 659, 685 fn. 24 (Paulus).) The burden on the plaintiff is similar to the standard used in determining motions for nonsuit, directed verdict, or summary judgment. (Kyle v. Carmon (1999) 71 Cal.App.4th 901, 907.)

We review de novo whether the cause of action arises from protected activity and whether the plaintiff has shown a probability of prevailing on the merits. (Greka Integrated, Inc. v. Lowrey (2005) 133 Cal.App.4th 1572, 1577.) 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 defendants evidence only to determine if it has defeated that submitted by the plaintiff as a matter of law. [Citations.] (Flatley, supra, 39 Cal.4that pp. 325-326.)

A. Arising From Protected Activity

As mentioned, appellants were required to make a prima facie showing that the causes of action in the Associations first amended complaint arose from appellants free speech or petition activity. (See  425.16, subd. (e)(4) [defining protected activity to include any . . . 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.].)

Appellants argue that the Associations claims arose from their free speech and petition activity, because the claims target appellants actions in using the Association treasury in their campaign to obtain law enforcement powers for the Associations members. They note that Government Code section 3502 protects the rights of public employees to participate in union activities, and they claim that a unions right to conduct its activities, and the use of union funds to engage in those activities, is constitutionally protected. Further, appellants point out, the expenditures challenged by the Association included reimbursement to appellants for their payment to a registered lobbyist and media consultant, who had helped the Association members obtain law enforcement status. On this basis, appellants contend: The claims against [appellants] arose from their expenditure of union funds to support [appellants] efforts as union officers to obtain peace officer powers for their represented bargaining unit, the Santa Clara County Correctional Officers, in a very prolonged and public controversy. As such, whether justified or not, the expenditures which are the subject of the complaint arose out of [appellants] protected activity.

We disagree. The Associations first amended complaint does not challenge appellants lobbying or other union activities. Nor does it contend that appellants should not have spent Association funds for union purposes or union activities. Instead, the Associations causes of action, and the evidence submitted by declaration, contend that appellants took money for themselves, without proper documentation orauthorization by the Association. The gravamen of the Associations complaint is therefore not directed at or based upon protected activity. We do not accept appellants implicit proposition that, because they now insist the funds were spent to further union activities, the Associations attempt to challenge the veracity of this assertion or recoup funds that were spent without authority or approval is limited by the anti-SLAPP statute.^[4]

Appellants cite Service Emp. Intern. v. Fair Political Prac. Comn (1992 9th Cir.) 955 F.2d 1312, for the proposition that the financing of campaigns has been held to impact First Amendment rights. In that case, the court observed that the act of contributing money to a political campaign is an act of political association protected by the First Amendment, and it ruled that contributors to political campaigns therefore had standing to challenge a law imposing campaign contributions. Nothing in the case suggests that Californias anti-SLAPP statute protects union leaders for unauthorized expenditures. Nor does it suggest that union leaders have a constitutional right to divert funds from their union.

Appellants also suggest that the Associations first amended complaint was motivated by Abbates prior political activities and constitutes an effort to dissuade Abbate and others from continuing more of the same. However, in determining whether a cause of action arises from an act in furtherance of protected activity, the question is not whether the plaintiff filed the lawsuit because of or in retaliation for protected activity, but whether the cause of action is based upon protected activity: That a cause of action arguably may have been triggered by protected activity does not entail that it is one arising from such. (City of Cotati v. Cashman (2002) 29 Cal.4th 69, 78 [anti-SLAPP motion should not have been granted where citys declaratory relief action in state court arose from a controversy over the validity of an ordinance that prompted federal litigation, not from the filing of the federal litigation itself].) The Associations decision to file its lawsuit may have been prompted by appellants political positions, but the claims are not based on, and do not arise from, constitutionally protected activities.

B. Probability of Prevailing

Even if appellants had established that the Associations first amended complaint arose from appellants protected activity, they could not prevail on their anti-SLAPP motion because the Association established a probability of prevailing on its claims.

The declarations submitted on the Associations behalf summarized the findings of the investigation of the apparent financial irregularities involving appellants. The committee members discovered that appellants paid to themselves substantial sums in violation of the Associations bylaws and without proper documentation. For example, the general ledger reflected a number of transactions by which appellants were paid for Release Timetime taken by a union official away from his duties as a correctional officer to prepare grievances or address other union mattersin addition to their regular salaries, without proper approval. The committee found at least 25 checks issued to Meyers bearing only one signature, contrary to the Association bylaw that requires checks to be signed by two officers. In further violation of the bylaws, appellants purportedly made unbudgeted expenditures without prior approval by the membership, including payments on stipends and expense reimbursement requests. This evidence demonstrates a prima facie case of the Associations claims, including fraud, conversion, and breach of fiduciary duty.

Appellants dispute the evidence submitted by the Association. For instance, they argue that the checks bearing only one signature show no evidence of negotiation and leave open the possibility that another Association officer endorsed the check on the back. They also urge that all of the allegedly unauthorized or improper expenditures were made by check and were reflected in the Associations general ledger and other accounting records. By these contentions, appellants perhaps demonstrate that the Associations assertions are subject to dispute, but they do not establish that the Association failed to make a prima facie case or that the Association is barred from recovery as a matter of law. Appellants arguments are therefore insufficient. (Flatley, supra, 39 Cal.4th at pp. 325-326.)

Appellants statute of limitations arguments fare no better. They maintain that the Associations fraud and conversion claims are barred by the three-year statute of limitations (Code Civ. Proc.,  338, subd. (c), (d)), because the lawsuit was filed in October 2006, Abbate has not been an officer since 2001, and Meyers last questioned transaction was in May 2003. While the Association presented evidence that the wrongdoing was not discovered until at least 2004, and it argues that the wrongdoing could not have been discovered earlier due to appellants control, deceit and concealment, appellants counter that the alleged wrongdoing could have been discovered sooner because every expenditure was reported in the general ledger and accounting records of the Association. Again, appellants merely establish a disputed question of fact, and they have not shown that the Associations causes of action are time-barred as a matter of law.

Lastly, appellants contend that the Associations lawsuit is barred by section 903 of the Associations bylaws. Section 903 provides that all unresolved complaints about actions of the Board of Directors alleged to be inconsistent with the requirements of these By-Laws or the California Corporations Code shall be resolved by final and binding arbitration, which must be filed within 30 days after the alleged act or omission. However, appellants have not established by competent evidence that all of the alleged wrongdoing would have been subject to section 903 as actions of the board of directors (as opposed to acts of Meyers or Abbate), or that section 903 would provide the exclusive remedy for appellants alleged wrongdoing.

In sum, the Association demonstrated a probability that it would prevail on its claims within the meaning of the anti-SLAPP statute. The trial court did not err in denying appellants special motion to strike.

III. DISPOSITION

The order is affirmed.

NEEDHAM, J.

We concur.

JONES, P. J.

STEVENS, .J.*

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* Retired Associate Justice of the Court of Appeal, First Appellate District, Division Five, assigned by the Chief Justice pursuant to art. VI, 6 of the California Constitution.

^[1] Unless otherwise indicated, all statutory references are to the Code of Civil Procedure.

^[2] Appellants also filed a demurrer to the first amended complaint on the grounds of lack of subject matter jurisdiction, lack of legal capacity, failure to state facts sufficient to constitute a cause of action, and other pleading deficiencies. The court overruled the demurrer. This ruling is not at issue in this appeal.

^[3] In pertinent part, section 425.16 provides: (b)(1) A cause of action against a person arising from any act of that person in furtherance of the persons right of petition or free speech under the United States or 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. [] (2) In making its determination, the court shall consider the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based. ( 425.16, subd. (b)(1) & (2).)

^[4] In a similar vein, appellants contend the issue on appeal should be as follows: Is the expenditure of funds by a union officer, who is also a member of the represented public employee unit, for expense reimbursements for efforts in organizing[,] lobbying, litigation, and public relations, and for direct payments to lobbyists, an act that arises out of that union officers furtherance of free speech and petition? Because the first amended complaint does not challenge appellants expenditure of funds for those efforts, appellants misstate the issue.